Will Powell Signal Hawkish Shift at Tomorrow's Meeting?

investing.com:

Analysts are debating if last week’s sticky inflation news is the death knell for a June cut in interest rates by the Federal Reserve. This much is clear: the recent run of news isn’t encouraging for anticipating that a dovish turn for monetary policy is imminent.

On Thursday the government reported that producer price inflation was hotter than expected. Two days earlier, the Bureau of Labor Statistics advised that the Consumer Price Index rose more than expected.

The one-two punch of these reports has further dented confidence that the Fed will soon start cutting interest rates.

There are signs that the US economic growth is slowing, but not enough to trigger concern that the Fed needs to cut rates to counteract the threat of rising recession risk, which remains low at the moment.

Using Fed funds futures as a proxy for market sentiment indicates a roughly 60% probability that the central bank cuts at its June 12 meeting. That’s down from 70% two weeks ago.

Looking to the July FOMC meeting, the probability of a rate cut rises by 77%, but a growing number of analysts are skeptical about the timing and, in some cases, the likelihood for a rate cut in 2024.

“The Federal Reserve should not be in a race to cut rates,” says Joseph Davis, Vanguard’s global chief economist.

He tells The New York Times that the economy has been stronger than expected so cutting too soon may allow inflation to run hotter than the Fed wants in 2025. “We have a growing probability that they don’t cut rates at all this year.”

Jim Bianco of Bianco Research agrees:

“I’m in the camp that the Fed does not change policy in the summer of an election year,” he predicts via CNBC.

If they don’t pull the trigger by June, then it’s November [or] December at the