US100 edges lower after Fed decision 📉

🏛️ Dot plot signals slightly slower rate cuts than expected

The Federal Reserve did not surprise investors and decided to leave interest rates unchanged at 4.25%–4.5%. More importantly, however, the Fed revised its economic projections, pointing to slower GDP growth, slightly higher unemployment, and slightly higher inflation compared to the March forecasts.

• Futures markets are still pricing in around 50 basis points of monetary policy easing in 2025 — equivalent to two rate cuts — despite higher rate projections ("dots") for 2026–2027.
• The probability of a rate cut in September has risen to about 71%, and in October to around 85%.
• The rise in rate projections for 2026–2027 suggests that if inflation proves persistent (or if tariffs impact prices), the Fed is prepared to slow the pace of cuts, not accelerate them.
• The unemployment rate at the end of 2025 is projected at 4.5%, just half a percentage point above current levels — not a sign of recession yet, but it gives the Fed room to maintain a restrictive stance if prices fail to fall.
• The core PCE inflation forecast for next year is 3%, meaning actual disinflation in services will be critical before monetary policy can be meaningfully eased.

The dot plot appears hawkish, as even though the median expectation still shows two cuts in 2025, there is a hawkish shift in 2026/2027 (one cut removed compared to March’s projection).
For 2025, seven Fed officials now see no rate cuts (compared to four in March), and two forecast just one cut (compared to four previously).

Source: Federal Reserve

US100

We’re seeing a moderate market reaction. Risk assets are edging lower following the decision and the release of the new projections. However, the declines are not significant, and the market is now awaiting remarks from Fed Chair Jerome Powell.