The Federal Open Market Committee
The dot plot "might be a better read on Fed views because it reflects individual views of Fed Presidents and members," noted
Sentiment has turned "cautious" since the
Inflation and rate target estimates should be the same, he said, and while tariffs loom large, the market is more concerned about "slowing economic growth and recession," Ragan said.
But
While the market expects a rate cut in June, she said, "ITR Economics forecasts that inflation will rebound in the latter half of 2025 and beyond, driven by underlying fundamental drivers. The imposition of tariffs and other inflationary policy proposals presents an upside risk to even higher inflation."
And while inflation isn't expected to "exceed the highs of the most recent cycle," Saidel-Baker said, it "will limit the Fed's ability to continue the rate-cutting cycle far into 2025."
If inflation grows, as ITR predicts, she said, "it is possible that rate hikes — not cuts — could be back on the table before the end of this year."
Matt Weller, global head of research at StoneX, expects the Fed will acknowledge a slowing economy, especially the labor market.
"For the SEP, there's risk that Jerome Powell and company will revise its forecasts for interest rates down this year from December's 3.9% to closer to 3.8 or 3.7%, reflecting the potential for two-three more cuts if the labor market deteriorates further," he said. "Powell himself noted this possibility
"Expect Powell to mostly demur when it comes to questions about the impact of tariffs and DOGE," Weller said. "Likewise, he is unlikely to hint at any policy impact from the current pullback in the stock market; in other words, we haven't hit the strike price of the much-anticipated Fed put yet."
No rate cut before May, according to Morningstar Chief U.S. Economist Preston Caldwell, as a result of "slightly sticky inflation along with policy uncertainty."
But he expects three rate cuts this year, with the Fed funds rate at 3.50%-3.75% by 2026. "We expect it to fall further to 2.25%-2.50% by the first half of 2027," Caldwell said. "Falling inflation along with slowing economic and job growth should induce much more cutting from the Fed."
Still, James Egelhof, chief U.S. economist BNP Paribas, sees the SEP starting "to reflect prospects for higher, tariff-fueled inflation and softer U.S. economic growth." The FOMC likely has "been running tariff studies and will now incorporate some degree of higher inflation and lower growth as a result."
BNP expects cuts to resume next year.
Uncertainty will keep the Fed on hold, according to Morgan Stanley. "When and how it moves next is dependent on policy outcomes that remain unknown," they said. "Hence, Powell is likely to repeat they are not in a hurry to act."
Expect Powell to offer "a heavy dose of patience," while sounding "cautiously optimistic" but still note a cloudy outlook and policy uncertainty, they said.
And while the dot plot won't be changed, they expect "risks to GDP growth will shift meaningfully to the downside."
Wells Fargo Securities Chief Economist Jay Bryson and senior economists Sarah House and Michael Pugliese expect "the median dot for 2025 in the so-called dot plot will remain unchanged, although we would not be surprised if Chair Powell makes a dovish comment or two in his post-meeting press conference in light of recent policy uncertainty that has led to financial market volatility."
The Fed will continue to wait for clarity on policy and how it will impact inflation and jobs, they said. "We expect the post-meeting statement to make a nod to the recent moderation in growth and labor market conditions, but to otherwise be little changed."
While the base case is two cuts this year, "with markets currently pricing in 73 bps of cuts by the end of the year, a shift to one cut could further tighten financial conditions."
Still, inflation at about 50 basis points over target has policymakers wary, they said. "If the median dot for 2025 does change, we think it is more likely to signal 75 bps of easing rather than only 25 bps of rate cuts."
Principal Asset Management expects two or three rate cuts this year, said its chief global strategist Seema Shah, as inflation remains "sticky." Should the labor market deteriorate, she said, "the Fed would likely prioritize the full employment side of their dual mandate — introducing a more aggressive pace of easing."
Stephanie Link, chief investment strategist and portfolio manager at Hightower Advisors, is watching
While economic growth is slowing, she added, "I do believe it can grow 2% this year," as consumers will continue to fuel the economy.
The holding of rates will occur although data suggest slowing economic growth and easing inflation, said D.A. Davidson's Ragan. "Inflation and economic trends have eased," and "are much more conducive to a rate cut," he said. However, Powell has stated the Fed will watch for trends over several months before moving.
"We expect the Fed to credit extreme uncertainty due to tariff threats for the continued pause," Ragan added. Tariffs will be a focus, especially at the press conference, he said, "and DOGE will likely replace immigration as the next area of concern."
Ragan said he would like to see questions about "the federal budget deficit and how that might impact monetary (which the Fed controls) and fiscal policy (which the Fed does not control)."
