Synopsis:

CIBC reacts to today’s June FOMC decision by highlighting the Fed’s steady rate stance and a modest reduction in the projected easing path. The updated dot plot still reflects two cuts for 2024 but shows fewer cuts in 2026, along with growing internal disagreement. Broader uncertainty around trade, fiscal policy, and geopolitics continues to cloud the Fed’s outlook.

Key Points:

Fed Holds Steady, Slightly Narrows Easing Path:

• The Fed maintained rates at current levels.

• The June SEP median still points to two cuts in 2024, consistent with March.

• However, the overall cycle now shows 100bps of cuts, down from 125bps previously, as the 2026 dot was reduced by one cut.

Greater Division Among Fed Members:

• There is now more disagreement within the FOMC, with some calling for no cuts in 2024.

• The distribution widens significantly in 2026, reflecting diverging views on long-run policy needs.

Neutral Rate and Economic Projections:

• Median neutral rate estimate unchanged at 3.0%, but with a wide range of individual views.

• Forecast revisions include downgrades to GDP and labor market strength and a slightly higher inflation trajectory—all largely anticipated.

Uncertainty Still Reigns:

• The Fed’s outlook remains hampered by:

  • Unsettled trade policy and legal ambiguity around tariff authority and tax funding

  • Geopolitical risks and potential oil price shocks

• These uncertainties contribute to a paralysis in policy clarity, even as inflation and employment data evolve.

Conclusion:

CIBC views today’s FOMC outcome as a reflection of policy caution amid heightened uncertainty. While the Fed continues to signal two cuts this year, reduced forward easing and rising internal divergence show growing discomfort with a consistent narrative. Markets may remain data-dependent and sensitive to geopolitical or trade-related developments, as Fed guidance stays tentative.