FOMC left interest rates unchanged and the 24-year interest rate cut forecast declined to 1 time - next year 4 times

Chairman Powell of the US Federal Reserve (FRB) stated at the press conference after the FOMC meeting that “recent inflation indicators are better than earlier this year, and slow further progress is being seen toward our inflation targets.” On top of that, he said, “In order to strengthen confidence that the inflation rate is continuously moving towards 2%, it is necessary to further see good data.”

　　Officials' views on the path of policy interest rates were diverse. According to the published interest rate forecast distribution chart (dot plot), interest rate cuts by the end of the year were predicted to be zero for 4 people, 1 time for 7 people, and 2 times for 8 people.

　　Some wording was revised in the statement issued after the meeting. In recent months, it was described that “slow further progress has been seen towards the 2% inflation target that the committee is aiming for.” Conventionally, it was stated that “no further progress has been seen.”

Interest rate forecast distribution chart (dot plot, June meeting) Source: FRB

　　It can be said that this wording correction is in response to an increase in data showing that the pace of price increases in April and May decelerated.

　　The May US Consumer Price Index (CPI) announced on the morning of the 12th suggests the possibility that progress towards the 2% inflation rate targeted by FOMC has resumed, and the content gave the market some sense of security.

　　Chairman Powell explained that the current CPI was welcomed by the officials. He said he hoped that similar statistics would be announced more. It can be said that it is progress in strengthening confidence, but he also added that it is not enough to justify interest rate cuts at the moment.

　　The chairman stated that “interest rate cuts that may have been implemented this year will be implemented next year,” and “the number of interest rate cuts within the year has decreased according to the median forecast, but it will increase by 1 time next year.”

　　In the FOMC participants' economic forecasts, which were announced at the same time as the statement, the latest predictions regarding inflation were also shown. The personal consumption expenditure (PCE) core price index for 2012 is expected to rise 2.8% from the same month last year. As of March, it had risen 2.6%.

　　The economic growth rate was 2.1%, and the unemployment rate was 4%, and both maintained the forecast at the time of the previous meeting.

　　Compared to the situation around the time the novel coronavirus pandemic (global pandemic) began, Chairman Powell pointed out that the current labor market in general is gradually decelerating while expressing that it is strong. On top of that, recognition was shown that if an unexpected softening was seen, a response by the financial authorities would be justified.

　　Additionally, the forecast for where long-term interest rates will land is 2.8%, up from 2.6% as of March. This suggests that FOMC sees that higher policy interest rates will continue for the time being.

　　Chairman Powell said, “We will be able to understand over time whether the policy is sufficiently suppressive to the economy,” and “the evidence that the policy suppresses the economy and has the effects we want is very clear.”