What to expect from the Fed's June FOMC meeting next week
Federal Reserve officials will be convening in Washington, D.C, next week for their June FOMC meeting, starting on Tuesday and concluding on Wednesday with a decision on interest rates and a press conference with the US central bank's Chair Jerome Powell.
Yahoo Finance senior Fed reporter Jennifer Schonberger outlines what to expect from next week's Fed meeting, including what the dot plot may signal about interest rate cut forecasts for 2025.
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The Federal Reserve likely to hold interest rates steady at next week's June meeting, but we are expected to get an updated dot plot on Wednesday. For more on what to expect from that upcoming Fed meeting, let's welcome in Yahoo Finances Jennifer Schonberger. Hey Jen, how are you? What, what are we looking for?
Hey Julie, I mean, has it been six weeks already? Because I feel like I just blinked, and here we are, another Fed meeting. The Fed are widely expected to hold interest rates steady next week, but investors are going to have their eye on something else. Whether policymakers retain expectations for two interest rate cuts this year. And many Fed watchers expect the Fed will stick with two cuts as they weigh so many unknowns, from whether tariffs will push up prices or push down growth, to geopolitical risks. Former Kansas City Fed President Esther George told me, given just how fluid things are at the moment, she predicts that they'll be reluctant to signal changes from where they were earlier. She says they don't want to shake markets and cause people to think that things are going to be tighter for longer. President Trump, of course, has been hammering the Fed and Fed Chair J. Powell to speed up the timetable for any rate cuts, most recently citing milder inflation. But Powell and many of his fellow policymakers have made it clear in recent weeks that they're still more worried about the risks of higher prices from Trump's tariffs than any risk in unemployment as they weigh both sides of their dual mandate. Adding to that, the impact of Israel's strike on Iran, and whether a protracted war could lead to higher oil prices and inflation this summer. Fed not Fed watchers note that the job market, although it has been cooling, isn't showing any cracks, with the unemployment rate holding steady at 4.2%, a historical low, while wages are growing at nearly 4%. Investors currently betting that the Fed is not going to cut rates until September, but many I talked to say the Fed ought to leave the door open for a rate cut in July, lest they box themselves in like they did last summer, where they took July off the table during the June meeting, only to find themselves having to cut by 50 basis points in September. Julie?
Yes, and Fed critics will always say that they're too late or too early, so we'll see what happens this time.
There's always an opinion, right?
There is. Thanks, Jen.
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Yahoo
an hour ago
- Yahoo
Fed governor breaks ranks and says rate cuts could resume next month to prevent further cracks in the job market
Christopher Waller, a potential Fed chair successor to Jerome Powell, said rates could come down as soon as July. The Fed voted unanimously on Wednesday to continue its wait-and-see strategy ahead of expected tariff-fueled inflation this summer. Initial jobless claims data reflects a weaker labor market, but not one that should warrant an immediate rate reduction, economists say. Federal Reserve Governor Christopher Waller said Friday that economic data could justify lower interest rates as early as next month, waiving off concerns of tariff-fueled price spikes and pointing to concerns about recent labor market data. In a CNBC TV interview on Friday, he said policymakers should look past short-term tariff effects on inflation and focus on the underlying trend, which he said has been favorable in recent months. 'I label these 'good news' rate cuts when inflation comes down to target. We can actually bring rates down. I've been saying this since about November of '23,' Waller explained. 'So I think we're in that position. We could do this and as early as July.' In fact, inflation, the unemployment rate, and GDP growth are running at or near the Fed's long-run targets, but rates are 1.25-1.50 percentage points above the so-called neutral rate, he pointed out, adding that cuts could come gradually with flexibility to pause if necessary. Still, he warned that the labor market is OK but isn't as strong as it was in 2022, noting a 25-year high in the unemployment rate for college graduate and slower job creation. 'If you're starting to worry about the downside risk to the labor market, move now, don't wait,' Waller, a possible contender to replace Fed Chair Jerome Powell when his term ends in May 2026, said in the CNBC interview. The comments come two days after the Federal Open Market Committee (FOMC) unanimously voted to keep its key borrowing rate targeted in a range between 4.25%-4.5%, which has been held since December. The committee reported 'somewhat elevated' inflation and a 'solid' labor market in a June 18 press release. That drew the ire of President Donald Trump, who called Powell a 'Total and Complete Moron' on Truth Social for holding interest rates steady and thinks the benchmark rate should be 2.5 percentage points below the current level. While the Fed remains upbeat about the job market, other indicators point to weakness. The four-week moving average of initial jobless claims is the highest it's been since August 2023, per this week's Department of Labor report. Challenger's May job-cut report recorded a 47% year-over-year increase in layoff intentions, the largest plans coming from the service, retail and tech industries. A monthly survey by the Federal Reserve Bank of Philadelphia that tracks manufacturing business activity in the mid-Atlantic region recorded overall decreases in employment in June, with its employment index falling to its lowest reading since May 2020. The index held its May value, missing economists' expectations of a slight increase in business activity. The National Federation of Independent Business' May jobs report found that 34% of small business owners reported job openings they could not fill in May, unchanged from April, and the lowest since January 2021. As the Fed maintains a wait-and-see strategy in anticipation of tariff-fueled inflation, economists are split on how the Fed might navigate the country's economic uncertainty—and how to interpret recent data suggesting a weakening job market. None of the economists contacted by Fortune see a rate cut in July. 'The FOMC's forecast of continued low unemployment is wishful thinking,' Pantheon Macroeconomics Chief U.S. Economist Samuel Tombs and Senior U.S. Economist Oliver Allen wrote in a June 20 report. 'We think the Committee again is unduly sanguine about the outlook for the unemployment rate.' Tombs and Allen of Pantheon Macroeconomics expect the unemployment rate to rise from 4.2% to 4.6% in the third quarter, and to 4.8% in the fourth, which exceeds the 4.5% median FOMC forecast. 'Pressure on the labor market will grow as the tariff shock works its way through the economy,' Allen said in a data note. Consumers haven't yet experienced the full effects of price increases due to tariffs, and economists say this will happen in the summer. '[Economic activity] was artificially boosted early in 2025 as businesses and consumers rushed to front-load purchases ahead of anticipated trade restrictions,' EY-Parthenon Chief Economist Gregory Daco told Fortune in an email. Daco expects the ripple effects of higher tariffs will be seen in the months to come, 'stoking inflationary pressures, weakening labor market conditions, compressing profit margins, restraining capital expenditures, and curbing household demand.' He expects consumer spending and business investment to decelerate significantly, and for the culmination of tariff effects on the economy to slow GDP growth to a near-stall speed, with output rising 0.8% year-over-year by the fourth quarter. The anticipation of summer inflation pressures has economists weighing when the Fed will cut rates, especially if job market data continues to concern them. Deputy Chief Economist at Oxford Economics Michael Pearce believes the recent initial jobless claims numbers show a gradual softening in the labor market, he told Fortune in an email. 'Even so, with inflation risks looming, we do not think the economy is weakening by enough to force the Federal Reserve into rate cuts in the coming months,' Pearce wrote. Jobless claims for federal workers remain low to February levels, Pearce added. Recent court rulings have the economist forecasting the timing of federal worker layoffs into later this year. But, not everyone sees the recent initial claims data as a bellwether for a job market slowdown. 'What I see is a labor market that has held up in the face of exceptional policy uncertainty and economic uncertainty,' Morning Consult Chief Economist John Leer told Fortune. The data collection and analytics company surveys 10,000 people every week to determine if they lost pay or income and collects data from a 'standardized version of the household survey' used to calculate the unemployment rate. From their numbers, Leer said he doesn't see evidence of significant weakening in the job market. 'Businesses are very hesitant to prematurely fire or lay off workers when potentially there's money to be made from keeping workers on payroll and selling more and having higher revenue as a result,' Leer said. As for potential tariff effects on the labor market, Leer said it can take up to two years for small businesses his company works with to feel any elevated input costs that come with the import taxes. 'You will see a continual sort of trickling in of higher prices over time, as companies wind down all of their excess inventories and have to rely on imports to a greater extent,' he said. This story was originally featured on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
3 hours ago
- Yahoo
Mild US Inflation Is Backdrop for Fed's Powell on the Hill
(Bloomberg) -- US inflation probably inched higher in May, offering scant evidence of extensive tariff-related repercussions that the Federal Reserve expects to become more apparent later in the year. One Architect's Quest to Save Mumbai's Heritage From Disappearing Bezos Wedding Draws Protests, Soul-Searching Over Tourism in Venice JFK AirTrain Cuts Fares 50% This Summer to Lure Riders Off Roads NYC Congestion Toll Cuts Manhattan Gridlock by 25%, RPA Reports Taser-Maker Axon Triggers a NIMBY Backlash in its Hometown Ahead of the key figures on Friday and fresh off the Fed's decision this week to keep interest rates unchanged, Jerome Powell heads to Capitol Hill for two days of testimony in which he'll lay out the case, again, for the central bank's go-slow policy approach. The Fed chair is likely to emphasize that while rate cuts are possible this year, officials want more clarity on the economic impact of White House trade policy. Economists see the personal consumption expenditures price index excluding food and energy — the Fed's preferred gauge of underlying inflation — rising 0.1% in May for a third month. That would mark the tamest three-month stretch since the pandemic five years ago. US central bankers largely see the Trump administration's expanded use of tariffs putting upward pressure on prices, eventually. But their latest economic forecasts also show officials see weaker economic growth and higher unemployment this year. Fed Governor Christopher Waller on Friday told CNBC that the inflation hit from import duties is likely to be short-lived, and he sees room to resume lowering borrowing costs as soon as next month. The Fed's next policy decision will come on July 30. What Bloomberg Economics Says: 'The Fed's preferred gauge, core PCE inflation, likely rose just 2 basis points in May, a modest uptick that will offer little clarity about upside risks to inflation in coming months. That's likely to leave some Fed officials still balancing the two sides of its mandate, rather than shifting focus to upside inflation risks.' — Estelle Ou, Anna Wong, Stuart Paul, Eliza Winger and Chris G. Collins, economists. For full analysis, click here Along with the May inflation data, the government's report on Friday is projected to show a second month of modest growth in household spending on goods and services. The last two months included a steep downturn in sentiment, related in part to heightened anxiety about the possible impact on prices from higher tariffs. Economists will also look to the report's personal income data to gauge the ability of consumers to continue spending. In the three months through April, inflation-adjusted disposable income growth averaged 0.6%, the strongest in more than two years. Other US data in the coming week includes May existing- and new-home sales, as well as two surveys of June consumer confidence. On Thursday, the government will issue its advance economic indicators report that includes an initial estimate of the merchandise trade deficit for May. In addition to Powell delivering the Fed's semi-annual policy report — he testifies to a House panel on Tuesday and the Senate Banking Committee on Wednesday — a slew of other central bankers, including New York Fed President John Williams, hit the public speaking circuit. For more, read Bloomberg Economics' full Week Ahead for the US Further north, Statistics Canada will release the first of two inflation prints before the Bank of Canada's July rate decision. Policymakers are closely watching firmer-than-expected core inflation and have signaled they'll remain on hold unless underlying price pressures ease. Industry-based gross domestic product data for April and a flash estimate for May are likely to show a pullback in exports and business investment as Trump's tariffs took hold. Elsewhere, multiple inflation releases in Asia, appearances by the euro-zone and UK central bank chiefs, and a prospective rate cut in Mexico may be among the highlights. Click here for what happened in the past week, and below is our wrap of what's coming up in the global economy. Asia It's a data-heavy week in Asia, with inflation figures due from four economies as well as fresh reads on industrial output, trade and consumer demand. For investors navigating geopolitical flare-ups and a fragmenting trade environment, the week's releases will offer timely clues about inflation persistence, consumer strength, and industrial momentum across Asia's most influential economies. Price prints from Singapore, Malaysia and Australia will help guide central banks as they tread cautiously on rate decisions. Singapore reports CPI on Monday, followed by Malaysia on Tuesday and Australia on Wednesday. Tokyo CPI — a leading indicator for Japan's nationwide gauge of prices — is due Friday. Beyond inflation, the slate offers insight into how Asia's trade-driven economies are faring amid global demand shifts. Early in the week, Australia, India and Japan report purchasing manager indexes, while South Korea releases confidence and sentiment surveys, along with exports and retail sales. Singapore's May industrial production data, due on Thursday, will help shed some light on domestic resilience. China publishes industrial profits on Friday, giving investors a read on margin recovery as the economy adjusts to trade frictions and a still-weak property sector. With stimulus measures limited and external demand cooling, Beijing is leaning on targeted support to maintain growth near its official target. Japan will report retail sales and the jobless rate Friday, which together with Tokyo CPI will help inform the Bank of Japan's next policy moves. The BOJ just left rates unchanged and unveiled a plan to step back from the bond market at a slower pace from next year. Thailand's central bank is expected to hold its key rate steady on Tuesday, with car sales and manufacturing data rounding out its domestic picture. The decision comes amid domestic political upheaval after the second-largest party in Thai Prime Minister Paetongtarn Shinawatra's government quit the ruling coalition, an outcome that may concern foreign investors who've dumped a net $2.3 billion of Thai stocks this year. For more, read Bloomberg Economics' full Week Ahead for Asia Europe, Middle East, Africa Business surveys and testimony by central bankers are among the highlights in the euro zone and the UK this week. The flash PMIs for June, due on Monday, will point to whether manufacturing and services are weathering the uncertainty posed by US tariff policies. Germany's Ifo gauge of business sentiment comes the following day, revealing how companies in the region's biggest economy are faring with trade stress in the initial months of Friedrich Merz's term as chancellor. Meanwhile, inflation numbers for France and Spain — the first major readings for June — are due on Friday. European Central Bank President Christine Lagarde will speak in the European Parliament on Monday, and a dozen or so other appearances by euro-area policymakers are on the calendar. Bank of England officials will also be out in force, with more than 10 appearances on the agenda. Among them, Governor Andrew Bailey will testify on Tuesday to the House of Lords, parliament's upper house. Views on a dramatic drop in UK retail sales may be eagerly awaited by investors. In Sweden, the Riksbank will release minutes of its decision to resume its rate-cutting cycle. Bulgaria's application to join the euro may advance on Thursday, with European Union leaders set to approve convergence reports on the country's readiness to adopt the currency. Ukraine's statisticians will release first-quarter growth numbers during the week. The South African Reserve Bank will publish its quarterly bulletin on Thursday, providing data on household debt and shedding light on whether the government achieved its first back-to-back primary surplus since 2008-09. For more, read Bloomberg Economics' full Week Ahead for EMEA Some monetary decisions are also on the calendar: With an inflation rate that's way below the central bank's target for 2025, Moroccan officials will most likely cut borrowing costs by 25 basis points on Tuesday to boost financing for an investment spree led by preparations to co-host the FIFA World Cup in 2030. The same day, Hungary's central bank is poised to keep its key rate unchanged for a ninth month due to inflation and geopolitical risks. Czech policymakers, in a decision on Wednesday, are likely to keep borrowing costs unchanged. Latin America Argentina's output report on Monday is likely to show that the economy expanded for a third straight quarter in the three months through March. Most analysts see faster growth through mid-year, and the consensus puts 2025's expansion at 5%. Analysts expect Mexico's mid-month inflation rate to have slowed, paving the way for Banxico's eighth straight rate cut Thursday. Also due from Latin America's No. 2 economy are retail sales, jobs data and the April GDP-proxy reading. Brazil's central bank on Tuesday posts the minutes of its June rate meeting. The BCB delivered a seventh straight hike, to 15%, and signaled that borrowing costs will likely remain steady for a long period. Brazil watchers can also look forward to the central bank's quarterly monetary policy report, national unemployment data and mid-month consumer prices data, along with a reading of the country's broadest measure of inflation. Colombia's central bankers meeting on Friday may see a bit of daylight for a second straight cut as May consumer prices data were better than expected, but the early call from analysts is for a hold at 9.25% In Paraguay, the central bank isn't expected to tinker with its 6% policy rate on Tuesday, even after May inflation slowed to 3.6%. For more, read Bloomberg Economics' full Week Ahead for Latin America --With assistance from Swati Pandey, Mark Evans, Laura Dhillon Kane, Monique Vanek, Robert Jameson, Ros Krasny and Souhail Karam. Luxury Counterfeiters Keep Outsmarting the Makers of $10,000 Handbags Is Mark Cuban the Loudmouth Billionaire that Democrats Need for 2028? Ken Griffin on Trump, Harvard and Why Novice Investors Won't Beat the Pros The US Has More Copper Than China But No Way to Refine All of It Can 'MAMUWT' Be to Musk What 'TACO' Is to Trump? ©2025 Bloomberg L.P.
Yahoo
3 hours ago
- Yahoo
Bad ‘vibes' may be having a bigger impact on the economy now
There has been a disconnect in recent years between the so-called soft economic data and the hard data as weak readings on consumer confidence didn't always translate to lower payrolls or GDP. But that may be changing as key buffers that propped up spending are disappearing, according to NerdWallet senior economist Elizabeth Renter. Americans used to say one thing about their feelings on the economy and do something else with their actual dollars. But that may be changing. The disconnect between weak readings on consumer confidence versus solid employment, income and GDP data was previously described as a 'vibecession' by economist Kyla Scanlon, who first used the term in her 2022 Substack post. The last vibecession hit as inflation was at the highest levels in more than 40 years, while an aggressive rate-hiking campaign from the Federal Reserve spiked borrowing costs, making auto loans and mortgages more expensive. But consumers continued to spend as the labor market remained robust. And aside from a brief dip in GDP, the economy avoided a recession. Confidence surveys also increasingly reflected partisan differences more than the actual economy. Fast forward to 2025. Consumer sentiment collapsed after President Donald Trump launched his trade war, and GDP shrank again, skewed by a rush to buy imported goods ahead of higher tariffs. Still, payrolls have held up, and inflation hasn't been as affected by tariffs as feared. But while sentiment recovered a bit after Trump postponed his highest tariff rates, it's still 20% below December 2024 levels. 'Despite this month's notable improvement, consumers remain guarded and concerned about the trajectory of the economy,' the most recent University of Michigan survey said. At the same time, the Trump administration is slashing spending and jobs, with ripple effects reaching contractors and even certain real estate markets. Businesses that are uncertain about the economy and the direction of tariffs have slowed hiring. Student-loan delinquencies are up, and AI is eliminating many entry-level jobs that once went to newly minted college graduates. Then there's oil prices, which have jumped since Israel launched airstrikes on Iran. The cumulative effect is taking a toll. 'I don't think the U.S. consumer has grown numb or blind to the headlines and economic risk—over the past month we've seen some sentiment scores rise slightly, but we have to think about where they were rising from,' Elizabeth Renter, senior economist at NerdWallet, said in a note on Friday. 'A little bit better doesn't necessarily mean good, even if it might mean hopeful.' As a result, it's getting harder to dismiss the so-called soft data on the economy and focus instead on the hard data. That's as Fed Chairman Jerome Powell has said he and his fellow policymakers won't act on rates until the hard data on unemployment and inflation gives them a clear reason to. But the soft stuff may be leaking into the hard stuff. 'Unlike a few years ago, the 'vibes' now stand to have a greater impact on behavior, and thus the health of the economy,' Renter wrote. 'That's because unlike a few years ago, people don't have the luxury of easily stumbling into a better job or relying on excess savings and debt payment forbearances.' In fact, household debt is rebounding to pre-pandemic levels and beyond, eroding the ability to absorb an unexpected expense or job loss, she added. Bill Adams, chief economist at Comerica Bank, similarly drew a direct line between consumer sentiment and actual spending. Digging into the May retail sales report, he noted that consumers didn't just pull back on durable goods like electronics and cars, which fell after an earlier jump to get ahead of tariffs, they also reined in spending on daily expenses like groceries and restaurants. Spending at building material and garden supply stores also saw big drops, suggesting less residential investment in home improvements. 'With declines visible in unrelated categories, it looks like weak consumer confidence was to blame for the pullback in consumer spending last month,' Adams wrote. This story was originally featured on
