The central bank decided to hold rates steady<\/a> at the June Federal Open Market Committee (FOMC) meeting, a move that was widely anticipated by Wall Street. But the new \u201cdot plot,\u201d which represents FOMC officials\u2019 interest-rate projections for each of the next three years in a matrix grid, showed a median forecast for just one interest rate cut in 2024, compared with three in March. The Fed also projected slightly higher inflation ahead, and in order to cut rates, Fed Chair Jerome Powell said he needs to see \u201cmore good data\u201d that confirms inflation is truly under control.<\/p>\n Investors didn\u2019t seem too spooked by the hawkish change in the Fed\u2019s outlook, however, partly because many forecasters already had fewer than three rate cuts penciled in for this year. The Dow<\/a> Jones industrial average fell just 0.09% on Wednesday, while the S&P 500 rose 0.85% and the tech-heavy Nasdaq<\/a> surged 1.53%.<\/p>\n \u201cDon\u2019t take too much direction from today\u2019s FOMC \u2018dot plot,\u2019\u201d Ronald Temple, chief market strategist at Lazard, told Fortune<\/em> via email. \u201cAs additional inflation and labor reports through the summer reaffirm that price pressures are decreasing and labor market tightness is easing, I expect FOMC members to reassess their forecasts yet again to include more rate cuts by year-end.\u201d\u00a0<\/p>\n David Russell, global head of market strategy at TradeStation, backed up that outlook. \u201cThis is a nothing-burger Fed meeting,\u201d he told Fortune<\/em> via email. \u201cThey know conditions are improving, but don\u2019t need to rush with rate cuts \u2026 Goldilocks is emerging, but policymakers don\u2019t want to jinx it.\u201d<\/p>\n To Russell and Temple\u2019s point, the latest Fed meeting may not have been as hawkish as the dot plot projections suggest. The only major change in the monetary policy statement, which accompanies the Fed\u2019s rate outlook, was the replacement of the words \u201ca lack of\u201d with \u201cmodest\u201d before the discussion of further progress toward the Fed\u2019s 2% inflation target, for example. And Powell told reporters<\/a> in his follow-up press conference that \u201cwe\u2019ve made pretty good progress on inflation,\u201d noting that Wednesday\u2019s consumer price index report was \u201cencouraging.\u201d\u00a0<\/p>\n The Fed is also still projecting a significant decline in interest rates over the next three years. Officials expect the Fed funds rate to drop from 5.1% in 2024 to 4.1% in 2025, and then to 3.1% in 2026. These projections, as always, are subject to change, but they\u2019re evidence that the Fed hasn\u2019t shifted its dovish view entirely.<\/p>\n The bond market is still pricing in a 60% chance of a rate cut in September as well, according to Fed futures contracts compiled by CME\u2019s FedWatch Tool<\/a>. That\u2019s below the 70% peak seen after the cool inflation report Wednesday morning, but 10 percentage points above Tuesday\u2019s reading.<\/p>\n In a dovish moment, Powell also hinted that recent strong jobs numbers might be slightly \u201coverstated,\u201d pushing aside some experts\u2019 concerns<\/a> about persistent wage growth caused by the strong labor market leading to stubborn inflation.<\/p>\n \u201cWe see gradual cooling, gradual moving toward better balance,\u201d Powell said, adding that it\u2019s still \u201ca very strong labor market, but not the superheated labor market of two years ago, or even one year ago.\u201d<\/p>\n Another reason markets might be discounting the Fed\u2019s hawkish dot plot is the disparity between Fed officials\u2019 interest rate projections. While seven officials are projecting one rate cut this year, four see no cuts\u2014up from two in March\u2014and eight see two cuts.<\/p>\n Overall, both professional investors and economists seem to view the latest Fed meeting as nothing but a reiteration of the central bank officials\u2019 mostly dovish, yet staunchly data-dependent stance, which promises they\u2019ll adapt to new data and remain nimble with policy decisions.\u00a0<\/p>\n \u201cThe Fed made their decision-making process fairly clear coming into today\u2019s meeting, and their policymakers are reacting to incoming data in a manner that is consistent with that process,\u201d Bill Adams, Comerica<\/a> Bank\u2019s chief economist, told Fortune <\/em>via email. \u201cIf inflation continues to moderate, as has been the trend over the last year and a half, the Fed will start to cut interest rates in the second half of 2024.\u201d<\/p>\n Finally, while Wall Street will undoubtedly continue to agonize over the Fed\u2019s projections and tone in future meetings, Powell hinted that the investor class might be reading too far into small potential moves in interest rates.<\/p>\n \u201cIf you look back in five or 10 years and try to pull out the significance to the U.S. economy of one 25-basis-point cut, you\u2019d have quite a job on your hands,\u201d he said.<\/p>\n<\/div>\n![\"\"](\"https:\/\/fortune.com\/img-assets\/wp-content\/uploads\/2024\/06\/Screenshot-2024-06-12-at-11.34.00-AM.png?w=1440&q=75\"\/)
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