MUFG expects the Fed to signal a hawkish shift by eliminating the 2026 rate cut and easing bias in today’s guidance.
Federal Reserve Chair Kevin Warsh is expected to remove the 2026 rate cut from the median dot plot and drop the easing bias from the FOMC statement, according to market guidance. The changes reflect persistent inflation concerns despite a sharp drop in Brent oil prices, which has eased near-term price pressures but not eliminated risks.
The Fed’s March projections implied one rate cut for 2024, but updated guidance may scrap that signal. The removal of the word “additional” in the statement would suggest the next policy move could be either a hike or a cut, reinforcing a more cautious stance.
While lower energy prices could allow Warsh to downplay inflation risks, the overall tone is expected to remain hawkish. Markets will focus on whether the Fed signals a prolonged pause or leaves room for future tightening.