June FOMC Preview: Dot Plot Dilemma-Will Powell Push Cuts into 2026?

FOMC Preview: Prolonged Wait and See？Wall Street Divided as All Eyes Turn to the Dot Plot

The Fed's FOMC is set to conclude its policy this week on Thursday 18th of June 2025 on 2pm ET. While the market has fully priced in a decision to keep interest rates on hold, "unchanged" is far from eventful. Despite recent economic data offering more justification for rate cuts, will Powell lean on escalating geopolitical tensions as justification for staying sidelined?

Why This Meeting is a Big Deal: The Devil is in the Details

This meeting is pivotal, as it will be accompanied by the quarterly Summary of Economic Projections(SEP) and the closely watched "dot plot", markets will get a fresh read on how the Fed perceives the trajectory of rates, growth, and inflation for the remainder of 2025 and beyond.

· The Dot Plot is King: The dot plot is the main event. Analysts are watching for a hawkish shift in policymakers' rate expectations. Deutsche Bank, for instance, predicts the new dot plot will signal only one rate cut for the remainder of the year. In contrast, a recent Reuters poll of 105 economists found that over 60% expect at least two cuts in 2025. This divergence highlights the uncertainty the Fed itself is facing.

· Updated Economic Projections (SEP):This is where the Fed's reaction to recent data will be quantified. The forecasts for growth, unemployment, and inflation will be scrutinized. Citing tariff effects, Deutsche Bank anticipates a downgrade in the Fed's GDP growth forecast (from 1.7% to 1.3%) and an increase in the inflation forecast. Similarly, analysts at EY project a notable rise in the unemployment rate forecast to 4.5% by the end of this year, a signal of a cooling economy.

· Powell's Cautious Stance: As noted by Pepperstone and EY, Fed Chair Jerome Powell is expected to maintain a cautious tone, emphasizing that the current policy rate is in a "good place" and there is no urgency to adjust. J.P. Morgan concurs, stating the committee feels no strong push to pivot, reinforcing the likelihood of a steady message. Powell will likely reiterate that the bar for easing policy remains high, especially with upside inflation risks from trade policy uncertainty.

Wall Street's Divided Outlook

The divergence in institutional forecasts is stark, underscoring the murky economic picture. The timing of the first cut is a major point of contention, with predictions ranging from as early as July (Morningstar) to September (UBS,Reuters poll) or as late as December (J.P. Morgan,Goldman Sachs).

Here's a snapshot of the varied expectations for rate cuts in 2025:

The Critical Juncture: Crosscurrents of Data and Risk

· Softening, But Sticky Data: Recent reports on CPI and the labor market show a cooling trend. This supports the case for eventual rate cuts. However, core inflation remains stubbornly above target, justifying the Fed's patient stance.

· The Tariff Wildcard: Tariffs are a recurring theme in institutional analysis. Goldman Sachs recently raised its probability of a U.S. recession to 35% from 20%, citing the potential negative impact of tariffs on growth. This uncertainty is a key reason EY believes the Fed will remain on hold, as officials weigh the inflationary impact of tariffs against their potential to slow the economy.

· "Normalization" vs. "Insurance": Goldman Sachs provides a key insight into the Fed's potential thinking. The argument for rate cuts is shifting. With economic growth remaining relatively resilient, the need for "insurance" cuts to protect against a downturn has diminished. Instead, any future cut would be framed as a step toward "policy normalization" from a restrictive stance.

Current Market State: Weakening But Still Subtle

The flare-up of geopolitical risk in Israel and the Middle East has weighed on equity markets. From a technical standpoint, the $S&P 500 Index (.SPX.US)$ is showing signs of softening in the wake of the conflict news, though it is still premature to call for a definitive break of its rising trend.

J.P. Morgan team—spot-on in this cycle—now advises caution on U.S. equities.

After accurately calling the 6,000-point high in March and the subsequent low in April, J.P. Morgan's Market Intelligence team is once again issuing a warning:the recent rally, whcih left many investors behind, may be approaching its end.In his most recent report, Andrew Tyler, head of J.P. Morgan's Market Intelligence, noted in his latest report that he sees the market as "vulnerable to a near-term pullback." He points to a fluid geopolitical situation and a looming trade deal expiration as key risks. As a result, the team is officially pivoting from a "tactically bullish" stance to "tactically cautious," citing the growing risk of a correction as volatility is expected to spike across asset classes.The duration of the ongoing war remains uncertain. The primary concern is that a longer-than-expected conflict, coupled with high oil prices, could derail the current trend of falling inflation in the U.S. Since June 1st, $Crude Oil Futures (AUG6) (CLmain.US)$ have already surged over 16%, rallying from a low of $55 to over $70—a development that is not to the liking of President Donald Trump.

Two Themes, One Market: Inflation Hedges or the AI Boom?

The current market environment is more complex than anticipated, with multiple trading themes overlapping each other. Fueled by a surge in oil prices, $Oil & Gas Integrated (LIST2224.US)$ is showing significant strength, exemplified by stocks like $Sky Quarry (SKYQ.US)$ which ralled about 17% on Monday.

$Houston American Energy (HUSA.US)$, the breakout name during the 2022 Russia-Ukraine war, is back in focus.

AI continues to dominate the narrative—yesterday’s standout was $Advanced Micro Devices (AMD.US)$, demonstrating notable technical strength.

So, how are fellow Moomooers placing your bets before the meeting, feel free to share your thoughts!

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