US Interest Rate & SEP Prep

On Wednesday the 17th of June at 14:00 ET, the FOMC ends their 2-day meeting and announces the US interest rate decision, alongside the latest Summary of Economic Projections.
Here are some views on what to expect.

General Expectations
US Interest Rate is expected to remain unchanged at 3.75%.

FOMC Median Rate Forecasts in SEP
Current Year – Forecast: 3.625% | Prior: 3.375% | Range: 3.875% / 3.125%
Next Year – Forecast: 3.375% | Prior: 3.125% | Range: 3.875% / 2.375%
Two Years Ahead – Forecast: 3.125% | Prior: 3.125% | Range: 3.625% / 2.125%
Long Run – Forecast: 3.125% | Prior: 3.125% | Range: 3.625% / 2.125%

What to Expect
US Stocks
A dovish decision, statement, or SEP, especially one showing more confidence on inflation or a lower dot plot, could support equities, particularly technology, growth, and other rate-sensitive sectors.
A hawkish outcome, such as fewer projected cuts or stronger inflation warnings, could weigh on stocks by tightening financial conditions.
US Dollar
A higher-for-longer message would likely support the dollar, as US yields remain relatively attractive.
A softer statement or lower rate projections may pressure the dollar, as markets price in a more accommodative Fed path.
US Government Bond Yields
If the SEP shows higher inflation forecasts or fewer cuts in the dot plot, yields may rise, especially at the front end.
If policymakers lower their rate projections or emphasize growth risks, yields may fall as markets price in future easing.
Federal Reserve Policy
The key focus will be whether the Fed maintains a patient stance or starts preparing markets for rate cuts later in the year.
A cautious statement, elevated inflation projections, or a higher dot plot would reinforce a higher-for-longer policy outlook.
A softer inflation assessment and lower projected rates would strengthen the case for a more accommodative policy path.

Commentary
JPMorgan
The Fed is staying on hold, in line with OIS pricing.
After the recent improvements in incoming labour market data, we expect the Fed will remove its implicit easing bias both from the statement and from the previous 2026 median dot, which indicated one ease this year.
This will be the first Fed meeting with Warsh as Chair. We do not expect a substantial regime change in his communication and we think he has to build some credibility so he shouldn’t be dovish during the conference. We continue to see the next Fed hike in Sep 2027 against market pricing of earlier and more hikes (17bp hikes cumulatively priced by Dec26 and around 30bp by mid-27).

Bank of America
We expect the FOMC to keep the policy rate at 3.5-3.75% In June and remove the easing bias from Its statement. We don’t anticipate any dissents. The SEP should show higher Inflation, a lower u-rate and no cuts this year. A few policymakers will likely project hikes. We don’t think Warsh will submit forecasts. We expect him to lean dovish in the presser, arguing: i) supply shocks are one-offs. II) the Fed should be forward looking on AI disinflation. Ill) trlmmed-mean PCE and wage Inflation don’t look problematic.

Will there even be a SEP In June? We think so. Warsh doesn’t like forward guidance and it appears he wouldn’t need a formal vote to get rid of the SLP. in theory But when the Fed concluded Its review of communications last year. Powell said that there weren’t any proposed changes that the majority of the FOMC supported. So If Warsh were to do away with the SEP entirely, he would risk antagonizing most of his colleagues.
Instead, the path of least resistance for Warsh would be to decline to submit his own forecasts. He could argue that he simply didn’t have enough time to work with the staff

Citi
Our economists expect the removal of the Fed’s “easing bias” from the statement and 2026 median “dot” should show no cuts. This could be countered by a dovish Warsh who could keep the door open for further rate cuts. We retain our base case of 3x25bp cuts starting September.

Previous Release
At the previous meeting in April, the Fed held the federal funds rate unchanged at 3.50% to 3.75%, marking a third consecutive hold. The statement said economic activity continued to expand at a solid pace, labour-market conditions remained solid, and inflation was still somewhat elevated. The Fed also repeated that it would assess incoming data, the evolving outlook, and the balance of risks before making further policy adjustments.
The decision was not fully unified, with several dissents highlighting a more divided Committee. Some officials favored easier policy, while others objected to language that implied an eventual easing bias. Overall, the meeting reinforced a cautious, data-dependent Fed, with inflation still the key obstacle to rate cuts.

The most recent SEP was released in March. It showed policymakers still expected inflation to remain above target in the near term, while unemployment was projected to stay around the mid-4% range and growth was expected to remain positive. The dot plot remained central for markets, as it gave the clearest signal of how many cuts officials expected later in the year.

The vote split 8-4 was more hawkish than the markets anticipated, increasing the pricing in for higher rates in the US in the future, causing strength in the USD and US bond yields, and weakness in the US indices.