Still seemingly "navigating by the stars under cloudy skies”

As has been usually the case this year, the FOMC statement was little changed from the prior meeting with just modest tweaks as the press conference becomes the real place for anything potentially news worthy and market moving. The Fed maintained its stance that “economic activity has continued to expand at a solid pace” and that the “unemployment rate remains low, and labor market conditions remain solid.” As well as, “Inflation remains somewhat elevated.”

After repeating that “The Committee is attentive to the risks to both sides of its dual mandate”, they left out this from the May meeting that they judge “that the risks of higher unemployment and higher inflation have risen.”

They off course updated for us their economic projections and I’ll just mostly focus on 2025 because their guess for 2026 and beyond is as good as yours/ours. The 2025 GDP estimate falls to 1.4% from 1.7% and in turn their unemployment rate expectations rises one tenth from March to 4.5% vs 4.2% as of May. Headline PCE goes to 3.0% from 2.7% while the core estimate moves to 3.1% from 2.8%. I’m guessing the updated inflation guess is reflective of what they think about the tariff flow through as the 2026 forecast sees it back down to 2.4% for both headline and core.