June FOMC meeting: Notable shift in the “dot plot”

Wells Fargo Research Team Wells Fargo

Summary

As widely expected, the FOMC made no substantive policy changes at today's meeting.
The Committee maintained its target range for the fed funds rate between 0.00% and 0.25%, and it kept its monthly pace of asset purchases unchanged.
But the FOMC raised its inflation forecast considerably for 2021, and most members see the risks to inflation as skewed to the upside.
7 of the 18 committee members expect that rates will be higher at the end of next year, and 13 members look for higher rates at the end of 2023. The shift in the "dot plot" indicates that members have brought forward their expectations of eventual tightening.
The FOMC raised the interest rate that the Fed pays to commercial banks on reserves that they hold at the central bank as well as the rate on the Fed's reverse repurchase agreement facility. These moves should be interpreted as technical adjustments that are meant to improve functioning in the money market rather than a signal of imminent monetary tightening.

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Wells Fargo Research Team

Wells Fargo

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