June 13 Macroeconomic data interpretation: The Federal Reserve announced its interest rate decision and economic forecast summary and dot plot. Recommended reading ★★★★
At 02:00 in the morning, the Federal Reserve announced its interest rate decision and a summary of economic expectations. At the same time, the U.S. second quarter dot plot was released. The result was that the expectation of interest rate cuts was greatly weakened, and the positive sentiment of unemployment and CPI was weakened.
data:
1. The interest rate decision currently continues to maintain 5.25%-5.5%, which is in line with market expectations.
2. GDP growth: 2.1% in 20204, 2.0% in 2025 and 2026, and 1.8% in the long term. The actual GDP forecast is declining. The Federal Reserve believes that the US economy will decline slowly in the future (this is a pre-adjustment for a soft landing)
3. Unemployment rate: 4.0% in 2024, 4.2% in 2025, 4.1% in 2026, and 4.2% in the long term. The upper limit of the unemployment rate forecast is too high. 4.0% in 2024 is the lower limit, and 4.2% in the long term is the bottom line. The Federal Reserve believes that the economic downturn will slightly worsen the job market, but it can still be controlled. (A cooling of the job market is still a necessary condition for a soft landing)
4. PCE inflation: 2.6% in 2024, 2.3% in 2025, and 2.0% in 2026 and beyond. The Fed expects inflation to continue to decline (a necessary condition for soft landing expectations)
5. Interest rate adjustment expectations: 5.1% in 2024, 4.1% in 2025, 3.1% in 2026, and 2.8% in the long term. The expectation of short-term interest rate cuts has been greatly weakened, and the expectation of long-term interest rate cuts has been expanded (weakening the current expectation of interest rate cuts and drawing the pie in the sky for the future)
Dot plot: Among the 19 officials, 4 officials believe that there should be no interest rate cut in 2024, 7 officials believe that the interest rate should be cut once, 8 officials believe that the interest rate should be cut twice, and no one mentioned the view of cutting the interest rate three times. Previously, 10 officials believed that the interest rate should be cut 10 times, but this time this view was overturned.
Summary: The current Fed's economic outlook is basically heading for a soft landing, with a slowing economy, a cooling job market, and effective inflation reduction. If you add a stable risk market, you basically have the soft landing expectation. However, no one mentioned the three interest rate cuts in the dot plot. Overall, it seems to reduce the expectation of short-term interest rate cuts and paint a bigger picture for the subsequent interest rate cuts, which prolongs the expectation cycle.
Impact: The dot plot shows that there will be only one rate cut in 2024, and the rate will be only 25 basis points. This is contrary to the unemployment rate last week and the positive CPI this week. It is bearish in terms of sentiment because the optimistic expectations for rate cuts have not increased. It depends on what Powell will say next. If there is only one rate cut, then the game point for the rate cut will be November or December at the end of the year, and the previous rate cuts in July and September have finally come to nothing.
Later on will be the third thread of tonight's macro narrative - Powell's speech. Although the Federal Reserve has given one interest rate cut, the market is still optimistic that there will be two interest rate cuts. Let's see what Powell says.
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