Fed cuts 25bps and dots project two more cuts this year
The Federal Reserve lowered rates by 25bps to 4-4.25%. The median dot shows 50bps of further cuts this year, amid rising risks to employment. There was a wide range of views on the committee, including Miran’s dot pointing to 125bps of additional easing this year (and a dissent for 50bps today), but the growth and inflation forecasts and Powell’s presser moderating the dovishness somewhat.
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Key Takeaways
- The Federal Reserve cut rates 25bps to 4-4.25% and the dots point to a further 50bps of easing this year.
- New Board Member Stephan Miran voted for a larger 50bps cut. And the dot plot reflected a range of views about the subsequent path. At one end of the spectrum, what’s clearly Miran’s “dot” expects another 125bps of cuts this year, while at the other end there is a dot calling for a rate hike. The median dot expects an additional cut in both 2026 and 2027.
- The other forecasts showed both the inflation and growth projections were revised slightly higher, and unemployment marginally lower.
- But Chair Powell made clear that the FOMC sees the balance of risks around the dual mandate having shifted, with a rapid softening in the labour market now balancing out still-elevated price pressures, requiring a more neutral monetary policy stance.
Powell was quick to shut down questions about encroachment on Fed independence, and markets are happy to interpret easier monetary policy as a broad tailwind for many asset prices. But we remain attentive to politicisation risks, and think it’s worth tracking carefully growing talk of the Fed’s “third mandate” to secure low long-term borrowing costs.
