🔮 Almost no one expects an interest rate cut when the Federal Reserve (Fed) meets this week, but that doesn’t mean it’s going to be a humdrum event. The central bank is set to deliver its updated economic forecasts and its popular “dot plot” projections – the best glimpse the market gets into how policymakers see inflation, growth, and borrowing rates moving over the next few years. Plus, with political pressures rising, investors can’t help but be curious: will the Fed stick to the data, or blink if things heat up? 😬 The problem lately is, the data’s not giving clear answers. Headline inflation has been easing – CPI came in at 2.4% in May – but the “core” measure (which strips out energy and food prices) has been stuck way above target at 2.8%. And both figures could soon shoot higher: new US tariffs are set to hit consumer goods in July, and a massive $2.4 trillion tax cut could heat things up even more. And in the bigger picture, economic growth has been losing steam and is expected to slow from last year’s levels. The labor market has appeared solid on the surface, but the details suggest weakness. Still, this economy’s dodged a downturn more than once – and if political risks ease, sentiment could rebound fast. 👀 That leaves the Fed stuck in a kind of glitch. Inflation and growth could swing in either direction. And that’s why the Fed’s been striking a cautious tone, staying data-dependent, and not promising much. Traders still expect one interest rate cut this year (probably in September). But a hotter economy could delay that and lift bond yields, while weaker data could pull the whole timeline forward and boost bonds, defensive stocks, and anything rate-sensitive. 📣 Meanwhile, the Bank of England and the Bank of Japan will also make rate announcements this week, and both are expected to stand pat this time around. That said, they’re likely to highlight an interesting divergence: the UK’s central bank has been lowering its key rate, while Japan’s has been gently picking its rate off the floor – treading carefully to avoid knocking over the country’s fragile recovery. And these global gaps in interest rates matter: the disparities drive investment flow – and that shapes currencies, bond yields, and which markets get the love. |
