The Federal Reserve will almost certainly keep rates steady at its policy meeting next week. That's the view based on recent statements by Federal Reserve officials, analyst comments and market bets.
But what is much less certain is what the Federal Reserve expects to do in the remaining six months of the year.
The June policy meeting will include a "dot plot," a summary of projections that visualize central bankers' expectations for potential rate cuts in the coming months and years.
"The big question is the midpoint for the 24th," he wrote. Michael Feroli, JPMorgan analyst, in a Friday preview of the next Federal Reserve meeting. "We think it will show two reliefs this year, up from three at the March meeting."
Since the Fed's last policy meeting, sentiment around interest rate policy has become more bearish, as subsequent inflation and employment data have shown signs of an economy that is still too hot to merit a rate cut.
The question on many investors' minds is how many cuts Federal Reserve officials are predicting.
Federal Reserve hawks are expected to forecast only one or even no cuts this year, Feroli said. Meanwhile, the pigeons are expected to project two.
As for the prospect of rate hikes, to which some Fed officials have nodded, Feroli doesn't see it in the cards.
Federal Reserve Chair Jerome Powell, who has been perceived as largely dovish in the face of sometimes conflicting data, is likely to stay on message and take a broader view, Feroli said. He is expected to emphasize that inflation is falling, however stubbornly, and that the labor market is achieving a better balance against a backdrop of solid growth.
