June S&P 500 E-Mini futures (ESM24) are up +0.10%, and June Nasdaq 100 E-Mini futures (NQM24) are up +0.63% this morning as market participants weighed slowing U.S. inflation against the Federal Reserve’s more hawkish tone on interest rates, with attention now shifting to crucial U.S. PPI data and an earnings report from software giant Adobe.
As widely expected, yesterday the Federal Reserve kept interest rates unchanged for the seventh straight meeting, leaving the federal funds rate target range at a two-decade high of 5.25%-5.50%. The Federal Open Market Committee adjusted language in its post-meeting statement released Wednesday, acknowledging “modest further progress toward the committee’s 2% inflation objective” in recent months, whereas previously, the statement had indicated a “lack” of further progress. At the same time, the Fed’s updated Summary of Economic Projections showed that the median forecast for the federal funds rate at the end of this year stood at 5.1%, implying only one 25 basis point rate cut in 2024, contrasting with the previous estimate of three cuts in March. The Fed’s “dot plot” revealed that four policymakers projected no cuts this year, seven expected only one reduction, and eight anticipated two cuts. Also, policymakers revised their core PCE inflation forecast upward, with the Fed’s preferred inflation gauge now expected to be 2.8% in 2024, an increase from the previous forecast of 2.6%.
