Where Next for the Fed’s Rate Path? | Presented by CME Group

Monetary Policy - The FOMC lowered the federal funds rate by 0.25% to a target range of 4% to 4.25% [1] - This marks the first rate cut in 2025 after a pause since December 2024 [1] - The updated dot plot projections signal a more dovish outlook, with a median forecast of two additional 25 basis point cuts by year-end [1] - There is divergence among officials regarding future rate cuts; nine expect two more cuts, six anticipate no further action, and one projects up to six cuts [1] Market Reaction & Fed's Stance - The market reaction underscores relief at the expected rate cut, but weariness over the Fed's balancing act between jobs and inflation [2] - Fed Chairman Jerome Pal characterized the 25 basis point rate reduction as a measured risk-management action [2] - The rate cut is intended to bolster a moderating labor market while avoiding excessive stimulation of inflation [2] - The Fed's tone started somewhat reassuring on jobs, but shifted hawkish, stressing careful navigation amid uncertainties [2]