Stocks dip but notch weekly wins after jobs report smashes expectations

It’s a near certainty that the Federal Reserve will keep rates steady at its policy meeting next week. That’s the view based on recent statements from Fed officials, analyst commentary, and market bets.

But what’s far less certain is what the Fed expects to do in the remaining six months of the year.

June’s policy meeting will come with a “dot plot,” a summary of projections visualizing the expectations of central bankers for potential rate cuts in the months and years ahead.

“The big question is the median dot for ’24,” wrote Michael Feroli, an analyst at JPMorgan, in a preview Friday of the Fed’s upcoming huddle. “We think it will show two eases this year, down from three at the March meeting.”

Since the last Fed policy meeting, sentiment around interest rate policy has turned more pessimistic, as subsequent inflation and employment data have shown signs of an economy that is still too hot to merit a cut in rates.

The question on many investors’ minds is how many cuts Fed officials predict.

Fed Hawks are expected to forecast just one or even no cuts this year, Feroli said. Doves, meanwhile, are expected to project two.

As for the prospect of rate hikes, which some Fed officials have nodded to, Feroli doesn’t see that in the cards.

Fed Chair Jerome Powell, who has been perceived as largely dovish in the face of sometimes contradictory data, is likely to stay on message, taking the bigger-picture view, Feroli said. He is expected to emphasize that inflation is coming down, however stubbornly, and that the labor market is coming into better balance against the backdrop of solid growth.