Highlights of the Federal Reserve FOMC statement and Powell's press conference

FOMC statement:

1. Statement overview: The Federal Reserve has maintained the benchmark interest rate unchanged at 5.25%-5.50% for the seventh consecutive time, in line with market expectations.

2. Interest rate outlook: The dot plot cuts the expected rate cuts this year from 3 to 1, and raises it to 4 next year; among the 19 officials, 4 officials believe that there should be no rate cuts in 2024, 7 officials believe that there will be one rate cut, and 8 officials believe that there will be two rate cuts. It is expected that it will be inappropriate to cut interest rates before there is greater confidence that inflation can continue to move towards 2%.

3. Inflation outlook: The PCE and core PCE expectations for this year and next year have been raised, and it is believed that inflation has made further moderate progress in recent months.

4. Economic outlook: The Federal Reserve maintains its GDP growth forecast for 2024-2026. The unemployment rate forecast for next year has been slightly raised.

Powell press conference:

1. Interest rate outlook: It is possible to prepare to keep interest rates unchanged where appropriate, and will rely on data to make decisions one by one. No one has set a rate hike as a basic expectation. If employment is unexpectedly weak, we are ready to respond, and it is not yet time to announce a rate cut date. Reiterate that the dot plot is not a path guide. Long-term interest rates are theoretical concepts, and current policies are restrictive.

2. Inflation outlook: Inflation has eased significantly, but it is still too high. So far this year, there has been no greater confidence in inflation to cut interest rates. More good data is needed. Officials expect good but not excellent inflation data. The latest CPI data has been initially reflected in this meeting.

3. Economic outlook: Recent indicators show that economic growth is still expanding at a steady pace. It is generally expected that GDP growth this year will be lower than last year's level. May's employment data may be somewhat over-interpreted, but it is still strong. The labor market is moving towards a better balance, the unemployment rate remains low, and the strength of the labor market is expected to continue.

4. Market reaction: From the announcement of the resolution to Powell's speech, gold and Bitcoin fluctuated downward, the US dollar strengthened, and US Treasury bonds rose 5BP in 2Y. US stocks fell first, then rose to a new high and then dived.

5. Latest expectations: Interest rate futures price in the Federal Reserve to cut interest rates by a cumulative 44BP this year, down 6BP from before the meeting, and the probability of a rate cut in August has dropped to 65%.