The dot plot from Federal Reserve members outlines the projection for rates at the end of 2026, 2027 and 2028. At the March meeting, the FOMC was projecting 1 cut in 2026 to 3.4%, and another in 2027 to 3.1%. The current projections shows.
- The end of 2026 3.8%, vs 3.4% in March
- The end of 2027 3.6% vs 3.1% in March.
- The end of 2028 3.4% vs 3.1% in March
The skew of the expectations for June shows:
Looking at the skew,
- 1 member sees a cut
- 8 members see unchanged
- 3 see 1 hike
- 5 see 2 hikes
- 1 sees 3 hikes
There was one who did not put in a projection which is assumed to Warsh not putting in a projection.
The skew is bearish. US stocks have moved lower with the NASDAQ down -0.03%
The March skew of expectations showed that for 2026,
- 1 (Miran) who looked for the rate to reach 2.5% to 2.75% (4 cuts)
- 2 who saw 3 cuts
- 2 who saw 2 cuts
- 7 who saw 1 cut
- 7 who did not see a cut
The expectations for GDP, unemployment, and inflation shows lower GDP in 2026, lower unemployment and sharply higher inflation for headline PCE and core PCE.
- GDP for 2026 was lower at 2.2% vs 2.4%
- Unemployment rate at 4.3% vs 4.4%
- PCE headline at 3.6% vs 2.7%
- PCE Core 3.3% vs 2.7%
For 2027 PCE and core PCE remains above 2.0% at 2.3% and 2.5% respectively. In 2028 the estimates are near the 2% target at 2.0% and 2.1% respectively.
US stocks have moved lower with the down -0.04%, the S&P down -0.37%, and the NASDAQ down -0.32%.
US yields are higher:
- 2 year yield 4.131%, +8.4 basis points
- 5 year yield 4.209%, +5.6 basis points
- 10 year yield 4.455%, +2.7 basis points
- 30 year yield 4.932%, +3.4 basis points
The Federal Reserve Board has suddenly turned more hawkish which makes you wonder if they just followed Powell who was too dovish for them. Now Warsh comes in who was presumingly more dovish and the Fed members are going rouge.
