Market participants do not expect a Fed rate cut in June and July

A two-day meeting of the US Federal Reserve System starts today, following which, most likely, the base rate will remain unchanged in the range of 5.25-5.5% per annum. Traders will closely monitor the Fed's final statement and Chairman Jerome Powell's comments to understand the regulator's plans to ease monetary policy.

Powell is likely to emphasize again that the current rate exerts sufficient pressure on consumer prices, but in order to achieve the inflation target, it is necessary to keep it at this level for longer. This means that the Fed will begin easing policy no earlier than September, and possibly postpone it until 2025.

Traders are also almost certain that the US Central Bank will not cut the rate either in June or July, and estimate the probability of a 25 basis point rate cut in September at 50.8%.

Tomorrow, June 12, before the Fed's decision, the Ministry of Labor will present data on consumer price dynamics for May. Analysts predict that annual inflation (CPI index) will remain at 3.4% and core inflation (Core CPI index) will decrease to 3.5% from 3.6%. 

Also tomorrow, the Fed's forecasts for the US economy and dot plot will be published – a dot chart reflecting the individual expectations of members of the Fed Board of Governors and heads of Federal Reserve banks regarding interest rates. The March dot plot showed that 10 of the 19 Fed leaders expected a rate cut of at least 75 basis points in 2024. 

The June forecasts are likely to show that Fed officials now expect one or at most two rate cuts this year. The market will perceive the forecast of two rate cuts in 2024 as a «dovish» signal. This will mean that the Fed is preparing to cut the rate in September – before the presidential election.