The Fed held rates steady yesterday, as universally anticipated, with the 2025 median dot unchanged from June, still signaling one cut. For 2026, the median now projects zero cuts, down from one in June, with a lone cut eyed for 2027. The longer-run dot stayed put at 3.0%.

The 2025 dot was marginally hawkish compared to our expectations, perhaps reflecting a sunnier inflation view—core PCE edged up to 3.2% from 3.1% in June. Yet, 2026 core inflation was also revised to 2.5% from 2.4%, likely driving the tougher policy stance late in 2026 versus June’s forecast. The statement leaned upbeat, noting economic uncertainty “has further waned” (though, per the chart below, Committee members’ uncertainty barely budged). We stick to one cut in 2025, likely September, diverging from the median but heeding Powell’s caution against overweighing the dots.

Powell’s opening remarks mirrored June’s, but his Q&A radiated confidence on growth, citing “strikingly positive” CEO sentiment versus mid-2025. He dismissed labor market jitters, calling it “cooling gently, nothing concerning.” On inflation, he stayed reserved, avoiding fanfare over recent progress. On tariffs, he said impacts “unfold slowly,” with little effect expected yet and more insight due by autumn. He noted their certainty but murky scale.

Powell shrugged off the dots’ rate path, calling them low conviction sketches. Per the economic projections, 2025 rate views split—six members saw no cuts, seven backed one. The 2026 median rate (3.875%) rose 25 bps from June, but the mean climbed just 7 bps. Forecasts veered stagflationary, as expected. The core PCE uptick for 2025—a slim 10bp from June—surprised us, matching the prior quarter’s tweak. Still, most Committee members flagged upside inflation risks.