Fed decision: One big change economists are expecting

On Wednesday, June 12, investors will get the latest read on inflation when the May Consumer Price Index report is released. In the afternoon, the Federal Reserve will not only release its latest decision on interest rates but also unveil its latest Summary of Economic Projections. Many economists are expecting one big thing to change in those projections.

In the video above, Yahoo Finance's Josh Schafer explains what that one thing is.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Stephanie Mikulich.

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Well, speaking of two critical tests here for the markets coming up, it's actually happening this week on Wednesday, the latest reading on inflation, we've also got the fed decision.

Now May's Consumer Price Index report that is going to be released ahead of the bell.

And that's gonna be followed by the Fed's interest rate decision at 2 p.m. Eastern time, followed by chair Powell's press conference.

Now investors will be keeping a close eye on those projections for the remainder of the year.

Yahoo Finance's Josh Schafer joining us here at the desk.

And Josh, I think the question that so many investors, money managers are asking themselves at this point is yes, we do expect some sort of revision here from the fed, some sort of scaling back in those expectations.

But I think the question though is to the degree of that, how much of a scaling back are we going to see?

Yeah, it seems like right now the consensus among economists is that we're going to see one cut taken off the table as far as the projections that we're gonna see in that summary of economic projections in the dot plots, we'll go from a consensus of three cuts to two cuts, which we should note is essentially what the market's pricing in right now.

Right.

We're pricing in somewhere between 1.5 to 2 cuts and then you get into talking about basis points, but we're close enough to two cuts where I feel like that would sort of be where the market is at.

I think the key question will probably just be if we get any sort of hint about when the fed might start cutting and sort of how that's gonna work.

I think that's becoming the larger question here is as we get further down the line and we need more inflation prints and more inflation prints.

Because let's be honest, the prints we're getting aren't giving anyone a lot of confidence.

Then you just run out of meetings.

I think at some point to make two cuts, right?

How are you gonna make two cuts if you don't start in September?

Are you gonna go in November and December?

And that I think is probably the largest question headed in this week because it feels like everyone is pretty settled right now on a cut is coming out of that dot Pot and that is OK.

I loved RB C's uh Laurie Cavatina Notes this morning.

I mean, she's saying maybe we don't, she stress tested her models and say if we don't get any rate cuts, the S and P 500 might fall 8%.

To me that sounds conservative.

But you follow the market, Josh.

Yeah, I mean, she's looking at a 10 year yield of 4.75% too.

I think that's a key part of that.

Right, is the tenure would actually rise a little bit from where it is now and it stays there.

But I think what Rory was sort of getting at, which made a lot of sense to me.

So, was essentially the markets have priced in the soft landing right now.

And any risk that inflation comes down a little bit slower than we expect if you don't get very strong economic growth with that allow the no landing scenario, right where we really grow more than we expect.

That's not good.

And we're already at record highs and I think that's something that investors do need to remember right now.

We have had a good rally to start the year.

Yeah.

Well, saying the S and P 500 might fall 8% from where we are would still close higher on the year, right?

And I think that perspective is relevant here that we have already priced in a lot of good news.

So any bad news, you're probably gonna get a little bit of a pullback.

That's true.