If walls could talk, the boardroom walls of the Eccles Building in Washington, D.C., could provide an earful of economic data right now.
The Federal Reserve’s monetary policy committee began its fourth meeting of the year on Tuesday within that imposing D.C. structure. On Wednesday, at 2 p.m. EDT on the dot, the committee will announce its widely anticipated decision on the target range of the federal funds rate. That benchmark overnight lending rate for banks has a broad ripple effect on other borrowing costs and interest rates, including Treasury yields that impact mortgage rates.
As it weighs its decision, the Fed will consider a swath of data, including inflation metrics, labor reports and the general health of the U.S. economy.
The consensus prediction among investors is that the Fed will emerge from its monetary policy huddle and leave the fed funds range unchanged at its current range of 4.25% to 4.5%.
As of Tuesday afternoon, trading of futures contracts tracked by the CME FedWatch tool put the odds at 99.9% that the Fed will maintain its cautious approach on interest rate cuts in June. The CME Group data shows that the most likely scenario involves two 0.25% rate cuts this year beginning in September.
Economists also widely expect the Fed to stay patient.
“With inflation making progress, but remaining stubbornly above the Fed’s 2% target, and the labor market remaining resilient, the committee has little urgency to cut rates,” First American Deputy Chief Economist Odeta Kushi said in a statement provided to Scotsman Guide.
Kushi said she expects the Fed to cut rates later this year, “which could bring modest relief to mortgage rates.” She added that the Fed will likely be keeping a close eye on housing services and homebuilding.
“Housing is highly rate-sensitive, making it an important transmission channel for Fed policy,” Kushi stated. “A slowdown in housing demand can depress activity across a wide range of upstream sectors, including construction materials and durable goods.”
Former Federal Reserve officials said in a survey released this week they think the current Fed governors will stick with their previously released projection of two 0.25% rate cuts before the end of the year.
According to the survey conducted by veteran Wall Street Journal writer Jon Hilsenrath, in partnership with Duke University’s economics department, 10 former Fed officials and staffers think a single rate cut of 0.25% would be appropriate this year. Eight people surveyed said no cuts would be appropriate, while three respondents said a half percentage point in cuts would be the right course of action.
Analysts at Bank of America wrote in a note to clients last week that they think rising inflation will keep the Fed “on hold this year,” with no interest rate cuts at all in 2025, according to reporting by TheStreet. The financial news website reports that the Bank of America analysts predict the Fed will cut rates by a total of 1% during 2026.
