US Interest Rate & SEP Prep

On Wednesday the 18th of June at 14:00 ET, the FOMC convenes it’s 2-day meeting, and releases it’s interest rate decision, as well as the latest Summary of Economic Projections.
Here are some views on what to expect.

Overview
For the Interest Rate Decision, the overwhelming consensus is that the Fed will keep rates unchanged at 4.5% this meeting.
Market pricing sees around a 99% chance of this scenario, and analyst expectations are almost all aligned on this.

In the Summary of Economic Projections, it will include the latest “Dot Plot”, where Fed officials can plot where they think the interest rate will be at the end of this year, next year, the next 2 years, and in the longer-run.
Analyst expectations see these remaining broadly unchanged from the last SEP:

General Expectations
US Stocks
Markets will look for guidance on rate cut timing. Confirmation of two cuts remains in the SEP could lift risk assets; conversely, a more cautious outlook — stressing persistent inflation — might drag on sentiment, especially in rate-sensitive sectors.

US Dollar
If the SEP shows fewer or delayed cuts, the dollar may strengthen on expectations of higher-for-longer rates. Clear messaging that policy will remain unchanged could also buoy the currency, while any dovish shift may weigh on it.

US Government Bonds
Treasury yields are likely to respond to any tweaks in the SEP. A more hawkish tone or extended rate path would lift yields, whereas reaffirming the two-cut path could lead to yield compression. The auctions around this meeting will hinge heavily on the new guidance.

Federal Reserve Policy
Investors will parse the updated projections for growth, inflation, and the “dot plot.” Adjustments signaling fewer cuts or higher long-term rate expectations would hint at a more cautious policy path. The Fed’s emphasis on trade-driven stagflation risks suggests any shift in policy will remain very data-dependent.

Commentary
Wells Fargo
The FOMC is expected to keep the federal funds rate unchanged at its upcoming meeting and signal a continued wait-and-see approach. Economic activity remains resilient, with real personal consumption rising in April and steady job growth maintaining the unemployment rate at 4.2%. Inflation remains above target, with core PCE at 2.5% in April and likely inching up to 2.6% in May. While recent CPI and PPI data were softer than expected, it is likely too early for the Fed to assess the full inflationary impact of recent tariff increases. Given these factors, the Fed is unlikely to alter its current policy stance.

In the updated Summary of Economic Projections, the FOMC is expected to maintain or slightly raise its inflation and interest rate outlooks. Risks to both inflation and unemployment projections remain tilted to the upside, consistent with the March SEP. The median 2025 dot may shift from indicating 50 basis points of easing to just 25, while the 2026 dot could rise to 3.625%. Inflation projections are likely to be revised slightly higher due to tariff impacts, and GDP growth estimates may be lowered to just above 1%. However, the unemployment forecast may stay steady at 4.4%, reflecting constrained labor supply and firms’ reluctance to cut jobs.

Unicredit
The Federal Reserve is widely expected to keep its target range for the federal funds rate unchanged at 4.25–4.50% following its meeting on June 18, in line with market expectations. Fed officials have emphasized a patient approach as they await more clarity on the economic impact of recent government policies, especially tariffs. Resilient economic activity—particularly in the labour market—has supported this cautious stance.

While disinflation has continued, the effects of new tariffs on consumer prices are expected to materialize gradually, delayed by a surge in pre-tariff imports and firms’ hesitation to raise prices immediately. Business surveys like the Beige Book and ISM manufacturing point to looming price increases, and short-term consumer inflation expectations have moved higher. The updated dot plot is likely to reflect a close call between one and two rate cuts in 2025, with a base case of one cut in Q4. Officials are also expected to revise growth forecasts lower and core inflation forecasts higher. One additional cut is anticipated in Q2 2026.

Goldman Sachs
The FOMC is expected to reiterate its intention to remain on hold until there is greater clarity on economic conditions and policy developments. While participants’ assumptions around tariffs have likely risen since March, the recent soft inflation data and easing trade tensions suggest that policymakers will take a cautious approach in updating forecasts. As a result, bold revisions are unlikely.

The median projections in the updated Summary of Economic Projections are expected to reflect slightly higher inflation at 3.0% for 2025, slightly lower GDP growth at 1.5%, and a modestly higher unemployment rate of 4.5%. The median interest rate “dots” are likely to remain unchanged, showing two cuts to 3.875% in 2025, two more cuts to 3.375% in 2026, one cut to 3.125% in 2027, and a 3.0% long-run neutral rate.

Previous Release
On May 7, 2025, the Fed held the federal funds rate steady at 4.25–4.50%, maintaining its “wait-and-see” stance amid growing concerns about inflation and economic uncertainty tied to tariffs. Officials signaled patience while emphasizing the need to assess the impact of trade policy on price development and labour markets.

The SEP showed most participants still expected two rate cuts in 2025, though several officials pulled back earlier expectations. Fed commentary noted rising risks of both inflation and unemployment — a scenario described as stagflation — with the central bank unwilling to act hastily until clearer data emerged