US Fed's 'dot plot' could offer glimpse of rate-cut resolve

Investors may glean more on the Federal Reserve's resolve to ease monetary policy when US policymakers update their forecasts for interest rates Wednesday for the first time in three months.

The central bank - led by Chair Jerome Powell - is widely expected to hold borrowing costs steady for a seventh consecutive meeting, but there's less certainly on officials' rate projections.

A 41% plurality of economists expect the Fed to signal two cuts in the closely watched "dot plot," while an equal number expect the forecasts to show just one or no cuts at all, according to the median estimate in a Bloomberg survey.


Since raising their benchmark federal funds rate more than five percentage points starting in March 2022, the Federal Open Market Committee (FOMC) has held borrowing costs at a two-decade high since July.

A host of Fed leaders have suggested in recent weeks they see no rush to cut rates, with inflation more persistent and the outlook for growth staying solid.

Inflation by the Fed's preferred measure was 2.7% in the year ended April, compared to the central bank's 2% target. Data released Friday showed a surge in payrolls last month as well as accelerating wages, prompting traders to dial back expectations on rate cuts this year.

"The Fed will opt to keep rates steady for longer," said Thomas Simons, senior US economist at Jefferies. "They will want to see a renewed run of more favorable data in line with an inflation trend closer to 2% before they feel comfortable cutting rates."

Around the world
In Canada, fresh from becoming the first central banker in the Group of Seven to launch into an easing cycle, Bank of Canada Governor Tiff Macklem will speak at a conference in Montreal.

Elsewhere, a Bank of Japan decision that may pare back bond buying, inflation data from China to Sweden, and crucial UK wage numbers will be among the week's highlights.

The UK offer some data highlights this week. On Tuesday, labour-market numbers may show an uptick in pay growth in the three months through April, with an annual 6.1% increase anticipated by economists. Such an outcome is likely to add to the case for the Bank of England to avoid a rate cut this month.