The Federal Reserve meeting has wrapped up for another month, and the outcomes were largely anticipated. Interest rates remained unchanged, and the FOMC statement indicated the Fed's satisfaction with the current economic outlook. They also recognized the progress made on inflation, following a lower-than-expected CPI report for May. As predicted, the Fed reduced its forecasts for interest rate cuts in the Dot Plot, with the median forecast for this year's interest rates now at 5.1%, up from 4.6% in March. The previous expectation of three rate cuts this year has now adjusted to just over one cut.
### Key Highlights:
- CPI Report Impact: The lower-than-expected CPI report for May contributed to the Fed's optimistic outlook.
- Interest Rate Projections: The Dot Plot revealed not only projections for 2024 but also longer-term expectations. The median forecast for 2025 interest rates increased slightly to 4.1%, from 3.9% in March. The long-term terminal rate was also revised upward to 2.8% from 2.6%.
- Market Reaction: The market has responded positively to higher expected interest rates. The S&P 500 is poised to close at a new record high above 5,400. The 2-year Treasury yield decreased by 8 basis points today, a dovish adjustment, despite a brief larger decline of 15 basis points post-FOMC meeting.
Stay tuned for more updates as the financial landscape continues to evolve!