June FOMC Review

■ The FOMC's decision was largely in line with market expectations, including keeping the policy rate unchanged and adjusting the economic and price outlook. 

■ The Chairman hinted at a slower pace of rate cuts in the future during the press conference, maintaining a stance of not rushing to cut rates.  
 
    The Federal Open Market Committee (FOMC) of the Federal Reserve held a meeting on June 17-18, and the results announced were generally in line with market expectations. Concerning policy rates, the target range for the federal funds rate was held steady at 4.25%-4.50% for the fourth consecutive meeting. Additionally, the quarterly updated Summary of Economic Projections (SEP) (hereinafter referred to as the median of the participants) showed that the forecasts for real GDP growth in 2025 and 2026 were lowered, while the forecasts for unemployment and inflation (PCE deflator) were raised. These forecast adjustments reflect the heightened risks highlighted in the May FOMC statement, leading to a relatively limited reaction from financial markets. Notably, the statement removed references to the risk of rising unemployment and inflation, adjusting the assessment of uncertainty in the economic outlook from "still high" to "declining but still high." 
 
An impressive aspect of this meeting was that Fed Chairman Powell expressed caution about price increases influenced by tariffs during the press conference, where differences emerged in the forecasts of policy interest rates for 2025. In his remarks, Powell clarified that prices may increase this summer and did not foresee a significant decline afterward. Financial markets interpreted this as the Fed's cautious attitude toward rate cuts. In the latter forecasts, although the median policy rate remained at 3.9% as predicted in March, 7 of the FOMC members expected no rate cuts this year, while another 8 anticipated a 50-basis point rate cut this year, illustrating differing opinions among members. Simultaneously, the policy rate forecasts for 2026 and 2027 were raised to 3.6% and 3.4% (up from 3.4% and 3.1% in March), indicating that the market has stronger expectations for a slowdown in the pace of future rate cuts. 
 
Overall, the Fed maintains its position of not rushing to implement the next rate cut. The basis for this includes the statement indicating that uncertainty in the economic outlook has decreased; the economic and price forecasts in the SEP show expected continued improvement by 2027; and Powell stated at the press conference that more data is still needed to evaluate policy adjustments and other factors. Conversely, the forecast for real GDP growth in 2025 in the SEP has been lowered, suggesting that the negative impact of tariff policies on the US economy may gradually emerge. It is expected that the Federal Reserve will continue to keep the policy interest rate unchanged at the July FOMC meeting while observing the effects of the Biden administration's tariff policy on prices and the labor market. However, following the Jackson Hole Annual Symposium in late August, the possibility of another rate cut in September has not been entirely dismissed. Moving forward, US economic data regarding prices and the labor market will attract more attention.