The next Federal Reserve meeting takes place on Tuesday-Wednesday. While there is essentially no chance of a Fed rate cut this week, the meeting will be key for setting market expectations for possible easing later this year.

PCE Report, helps gauge the strength of the consumer sector of the economy. This is known as the Federal Reserve’s favorite inflation metric and can influence market watchers’ expectations of interest rate decisions made by the Fed. On this IBD Explains, Ed Carson and Meredith Heyman break down what investors need to know about the data.” vid-name=”How The Fed’s Interest Rate Cuts And Hikes Are Influenced By The PCE Report” vid-cat=”IBD Explains” vid-date=”05/23/2024″ vid-date-tmsp=”1716450329″ vid-image=”https://www.investors.com/wp-content/uploads/2024/05/IfSFuiBp-640×360.jpg” vid-authors=”MEREDITH HEYMAN”>
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The Fed meeting announcement will take place on Wednesday at 2 p.m. ET. The central bank also will release its latest economic projections as well as policymakers’ “dot-plot” rate outlook. At the Federal Reserve meeting in March, policymakers narrowly favored three rate cuts in 2024, but with several hawks favoring just two Fed rate cuts.

Since then, the lines have changed. Dovish policymakers will likely back just Fed rate cuts for the years, with hawks supporting just one, if any.

At 2:30 p.m. ET, Fed chief Jerome Powell will speak, providing more signals about the rate outlook.

Early Wednesday, the Labor Department will release its May consumer price index. Overall CPI should be relatively tame vs. April with gasoline prices continuing to fall. But core prices may be sticky.

Last week, the economic data was mixed. The jobs report showed strong hiring and wage growth from the establishment survey, but a big employment decline in the household survey. The ISM manufacturing index showed a deeper factory contract while the ISM services index returned to growth, beating views. Both ISM reports signaled job declines.

Fed Rate Cut Odds

June 12: Markets only see a 2.2% chance of a quarter-point rate cut at the June 11-12 Federal Reserve meeting, according to the CME FedWatch Tool. It was 70.1% back on March 27.

July 31: There’s an 8.2% chance of at least a quarter-point Fed rate cut by the July 30-31 meeting, down from 15.7% on May 31.  On March 27, there was an 83.7% chance of 25 basis points of easing by this Fed meeting and 35.4% for 50 basis points.

Sept. 18: This is a toss-up. Investors see a 50.5% chance of a quarter-point rate cut by the Sept. 17-18 Fed meeting, with a tiny 3.9% chance of 50 basis points. On May 31, the odds were for a 54.8% chance of Fed cut, and a slim 7.7% chance of 50 basis points. On March 27, investors pegged 25 basis points at 95.8%, with a 71% chance of 50 basis points and 27% for 75 basis points.

Nov. 7: The odds of a quarter-point Fed rate cut are 64.4% by the Nov. 6-7 meeting, which ends two days after U.S. elections. There’s a 17% chance of 50 basis points by this Fed meeting. On May 31, markets saw a 65.9% chance of a quarter-point cut and 19.3% for 50 basis points.

On March 27, the odds were a 97.9% chance for 25 basis points, 83.4% for 50 basis points, 48.9% for 75 basis points and 14.5% for 100 basis points.

Dec. 18: By the final Federal Reserve meeting of the year on Dec. 17-18, investors see an 86.3% chance of a Fed rate cut, and still 13.7% odds of now cut at all in 2024. Markets see a 46.2% chance of two rate cuts this year, and only 10.9% for 75 basis points.

On May 31, markets saw an 85% chance of at least one quarter-point cut and 44.5% for 50 basis points and 11.8% for 75 basis points..

On March 27, markets expected a 99.4% chance of a quarter-point Fed rate cut by year-end, 93.7% of 50 basis points, 73.5% of 75 basis points and 39.1% of 100 basis points. There was a 10.7% chance of 125 basis points, or five quarter-point Fed rate cuts.

Please follow Ed Carson on Threads at @edcarson1971 and X/Twitter at @IBD_ECarson for stock market updates and more.

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