Fed-O-Meter

Our Fed-O-Meter gives you a monthly snapshot of where we see the Fed moving on monetary policy. Dive deeper by reviewing the numbers behind the needle and our summary analysis below.

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Higher Chance of
More Conservative
Fed Policy
Higher Chance of
More Aggressive
Fed Policy
Research & Insights Fed-O-Meter

Summary Analysis

The economic expansion has advanced from the initial recovery, and the focus is now on metrics the Federal Reserve is looking at to gauge the health of the economy. Since the Fed’s dual mandate is to keep prices stable and maximize employment, we will focus on labor and inflation metrics, keeping in mind the broader economic impact as well. We created a Fed Monitor to track some of the data points that will impact the Fed’s decisions to tighten financial conditions. Additionally, we try to quantify the data and information outside of the dashboard to determine if the Fed is being more dovish than the data, and likely to be more aggressive in the future, or if they are being hawkish relative to the data, and likely to be more conservative in the future.

The Federal Reserve (Fed) concluded their June FOMC meeting by holding rates steady for the seventh straight meeting. June’s meeting fell on the same day as the release of the May CPI report, which indicated softening inflationary pressures. Still, the Fed’s quarterly economic projections update saw an uptick in inflation expectations for the remainder of the year and a downshift in expectations for 2024 rate cuts. The June dot plot implied a median projection of one rate cut by year end, falling from the previous projection of three rate cuts in March. Fed Chair Jerome Powell continues to emphasize data dependence when it comes to interest rate decisions. The Fed is hesitant to act until more disinflation is demonstrated.

The Fed has a dual mandate of maintaining price stability and to promote maximum employment. In May, inflationary pressures eased. Core CPI, which excludes food and energy, rose 0.16% for the month and 3.4% year-over-year. It was the lowest monthly increase since August 2021 and the lowest annual increase since April 2021. Headline inflation was flat in May. The Fed would prefer to see a few more inflation reports that provide evidence that inflation is headed towards their 2.0% goal before cutting interest rates. On the labor front, job growth was stronger than expected in May, with payrolls expanding by 272,000, bringing the monthly average this year to 248,000. However, the unemployment rate edged higher, reaching 4.0% for the first time since January 2022. Unemployment is still low, but the Fed will be keeping a close eye on labor data. Either way, the unemployment rate has trended higher over the last year, and inflation continues to ease. Based on this trajectory, the Fed might be nearing a rate cut.

The Fed’s next meeting is in late July. A July rate cut is unlikely based on current odds, but the probability rises to around 70% for a September rate cut. The Fed will not surprise markets with a rate cut. They will provide strong indications of a change in policy ahead of when that happens. In our view, the Fed is getting closer to cutting interest rates, most likely in the fall. We are maintaining the Fed-O-Meter in its current position.