Wall Street still wants to fight the Fed.
The Federal Reserve’s policymakers at yesterday’s meeting revised up theirfrom 5.1 percent to 5.6 percent, which would translate into a policy range of. The “dot plot” shows that nine Fed officials have forecasted that level for rates and three have forecasted a higher level. Just six officials have predicted rates lower than that, and no one has predicted anything lower than the current level.were largely consistent with this view.
The reaction to Wednesday’s announcements and Chairman Jerome Powell’s press conference suggests this is still happening. Markets and analysts are no longer forecasting a series of rate cuts this year, butto a range of 5.5 to 5.75 and keep it there through the end of the year. The CME Group’s metric based on prices of fed funds futures currently estimates just under a seven percent chance that we end the year at the median forecasted range, with no chance that we end higher.
The outcome most favored by the implied odds is one quarter of a point higher than the current target. The probability of that is estimated to be around 44 percent. After that is rates ending the year at their current level, with a 39 percent probability. A quarter-point cut is still getting a 10 percent probability,Traders work on the floor of the New York Stock Exchange on June 14, 2023, following news that the Federal Reserve was not raising interest rates.
That’s no longer the case. The latest projections have the economy growing 1.1 percent this year. That’s below the Fed’s long run estimate of 1.8 percent growth—but not that far below. More importantly, it looks achievable with sluggish growth in the third and four quarter after a surprisingly robust second quarter. So,If you look at the range of growth estimates, it is striking howthe Fed has become. At the March meeting, estimates ranged from -0.2 percent to two percent.
With the consumer price index rising just 0.1 percent and core inflation up 0.4 percent in May, a good deal of this spending looks real and not just nominal. So,, not just paying more for the same volume of goods and services.
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