The Fed delays rate cuts and raises the neutral rate

In Short

After this afternoon’s positive data on CPI inflation, the Federal Open Market Committee (FOMC) tempered expectations of quick rate cuts. While the median dots for this year now indicate just one cut, the pace of monetary easing remains unchanged from March.


  • Progress on inflation are not fast enough and the FOMC has reduced to one the median estimate of the cuts appropriate for this year. The median dot now sees the policy rate in the xx-xx by 2026. Importantly, the neutral rate estimate was raised from 2.6% to 2.8%.
  • Q1 bad data led to an upward revision of expected inflation, while the outlook for activity and the labour market was unchanged. 
  • September cut still possible, depend on having CPI data like today.

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The Fed delays rate cuts and raises the neutral rate

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