Interesting day ahead today: at 8:30 am the U.S. CPI for the month of May will be published with consensus pointing to a YoY increase of 3.4%, still far from the target of 2%. At 2 pm, chairman Powell will communicate the decision on official rates, with the expectation that they will remain unchanged. But since it’s June, the FOMC needs to update the Dot plot (see below), where each voting member is represented by a dot, telling us where they think (or where their votes will be) rates will be for this year, 2025, 2026 and long term. At the March meeting, most voting members were still favoring 3 cuts for this year, in contrast with the market that now has priced in just one, if at all. Another important topic today will be the pace of the balance sheet reduction, which will likely remain unchanged after last committee announcement. The Fed is running out of time to cut this year, and the data, both inflation and unemployment, does not give them any excuse to act. Muddle through is the most likely path.
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