Core Viewpoint - The Federal Reserve has initiated its first interest rate cut of the year, reducing rates by 25 basis points, and anticipates two more cuts within the year due to increasing employment risks [2][3][5]. Summary by Sections Interest Rate Decision - The Federal Reserve lowered the federal funds rate target range from 4.25%-4.5% to 4.00%-4.25%, marking the first rate cut in nine months [5][6]. - The decision was widely expected by investors, with a 96% probability of a 25 basis point cut predicted by futures markets prior to the announcement [5][6]. Employment and Economic Outlook - The Fed's statement highlighted a slowdown in job growth and a slight increase in the unemployment rate, indicating a shift in risk balance [5][6][11]. - The updated median GDP growth forecast for this year is 1.6%, slightly higher than previous estimates, while the unemployment rate is projected to reach 4.5% by year-end [14][16]. Inflation and Economic Risks - Inflation remains a concern, with the PCE inflation rate expected to rise to 2.7% year-on-year in August, and core PCE inflation at 2.9% [16][17]. - The Fed acknowledges a dual risk scenario where employment risks are increasing while inflation has not been fully controlled, complicating policy decisions [18][19]. Market Reactions and Predictions - Market analysts predict that the S&P 500 index could rise by 0.5%-1% following the rate cut, although there may be a 3-5% pullback before the end of the month [20]. - Historical data suggests that both stocks and bonds typically perform positively around the time of the first rate cut, with stocks showing a median increase of about 5% in the 50 days following a cut [20].

Core Viewpoint - The Federal Reserve's Logan indicated that the June CPI data suggests an increase in the PCE inflation rate, which is targeted at 2% by the Federal Reserve [1] Group 1 - The June CPI data reflects a trend that may lead to a rise in the PCE inflation rate [1]

Core Insights - The Federal Reserve's Logan indicated that the June CPI data suggests an increase in the PCE inflation rate [1] Group 1 - The June CPI data is a key indicator for predicting future inflation trends [1]

Core Viewpoint - Economists expect the preferred inflation gauge of the Federal Reserve, the Personal Consumption Expenditures Price Index (PCE), to peak at 3.2% by the end of 2025, which is higher than the 2.7% estimate from the March survey [1] Summary by Category - Inflation Expectations - The PCE is projected to reach a peak of 3.2% by the end of 2025 [1] - The core PCE inflation rate, excluding food and energy, is expected to reach 3.3% [1]