FED
Today's quarterly Dot Plot projections will provide a guide as to how quickly the FOMC envisages dialing back policy restriction. Expectations for this are obviously confused by the lack of certainty as to September’s cut, since the 2024 median will effectively tell us what participants are looking for in November and December.
- The median for expected total 2024 cuts is very likely to come in at between 75bp (4.50-4.75%) and 125bp (4.00-4.25%), depending in part on how big the September cut is (vs just 25bp to 5.00-5.25% in the June projections).
- From there, the 2025 end-year median is likely to come in at either 3.00-3.25% or 3.25-3.50%, closer to neutral settings (vs 4.00-4.25% in the June projections). Whatever the speed of the drop, 2026 and the newly-introduced 2027 end-year Dots are set to come in close to the longer-run rate of 2.8% (not expected to change in this round).
- In the event the FOMC goes for a 50bp cut, the below image is MNI’s expectation for how the new Dot Plot could look, vs June’s distribution. Note that this would reflect 25bp cuts in November and December 2024, shifting to quarterly cuts in 2025, reflecting a front-loaded approach. Risks to the 2025-26 medians are to the downside.
- If the Fed cuts 25bp, we would expect the 2024 end-year median to come in at 4.6%, again reflecting 25bp cuts in each of November and December. For 2025 and the outer years though we see the median roughly similar.
- Sell-side consensus is for a 4.6% 2024 median, 3.4% 2025 (range of 2.9-3.9), 2.9% 2026 and 2027, with no change to the Longer-Run dot at 2.8%.
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