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The Federal Reserve is expected to keep interest rates unchanged at 3.50-3.75% and take a “wait and see” approach amid the US-Iran war. At this meeting, we will also get the Summary of Economic Projections (SEP) and the Dot Plot. Inflation and unemployment will likely be revised upwards, while growth forecasts might be downgraded. The Dot Plot should still indicate just one rate cut in 2026. STATEMENTWe might see some minor changes in the statement but nothing meaningful to change the broader outlook. The first paragraph will likely see a tweak to economic activity from solid pace to moderate. The second paragraph is likely to remain unchanged but they may add that uncertainty increased amid the US-Iran war and that it could add upward pressure on inflation and weigh on economic activity in the short-term. The third paragraph shouldn’t see any tweak to the forward guidance as the “extent and timing of additional adjustments to the target range” remains appropriate. The same is true for the fourth paragraph.The last paragraph should also remain unchanged as Miran and Waller are expected to dissent in favour of a rate cut. Bowman could also join the dissenters but she’s unlikely to do so now if she didn’t do it at the last policy meeting. Potential surprises:No dissenters – slightly hawkish4 dissenters – dovishSUMMARY OF ECONOMIC PROJECTIONS AND DOT PLOTAt this meeting, we will also get the Summary of Economic Projections (SEP) and the Dot Plot. For 2026, inflation and unemployment are likely to be revised upwards, while growth forecasts might be downgraded. The Dot Plot is expected to remain unchanged showing one rate cut in 2026, one in 2027 and longer run median rate at 3.0%. Potential surprises:No rate cuts in 2026 – hawkishTwo rate cuts in 2026 – dovishPRESS CONFERENCEFed Chair Powell will likely maintain his usual neutral stance, and more so today given the risks posed by the US-Iran war and the disruptions in the Strait of Hormuz. There’s no reason for him to scare markets given that financial conditions have already tightened since the war started. This could weigh on economic activity and help mitigate inflationary pressures stemming from energy prices.MARKET PRICING99% probability of no change today26 bps of easing priced in by year-end (one rate cut)35 bps of easing priced in by June 2027
This article was written by Giuseppe Dellamotta at investinglive.com.
💡 DMK Insight
The Fed’s decision to maintain rates at 3.50-3.75% amidst geopolitical tensions is a crucial signal for traders. With inflation and unemployment projections likely to rise, this could lead to increased volatility in the markets, particularly for assets like DOT, currently at $1.63. Traders should keep an eye on the SEP and Dot Plot for insights into future monetary policy. If inflation expectations shift significantly, we might see a ripple effect across crypto and forex markets, especially if risk-off sentiment takes hold. Watch for key levels in DOT; a break below $1.50 could trigger further selling pressure, while a rally above $1.75 might attract bullish momentum. Given the current uncertainty, positioning for both scenarios could be wise, balancing risk with potential reward.
📮 Takeaway
Monitor DOT closely; a break below $1.50 could signal further downside, while a push above $1.75 may indicate bullish momentum.
