The Federal Reserve kept its benchmark interest rate unchanged on Wednesday, as widely expected. The latest dot plot from the June Summary of Economic Projections (SEP) still suggests two rate cuts in 2025. However, Fed Chair Jerome Powell struck a cautious tone, urging markets not to place too much confidence in that outlook. 

He highlighted ongoing inflation risks tied to tariff policy and geopolitical tensions in the Middle East.

Powell’s Remarks: Tariff and Geopolitical Risks in Focus

During the post-meeting press conference, Powell pointed to two major inflation concerns: tariff-related uncertainty and the potential for elevated oil prices driven by conflict in the Middle East. 

While the Fed still projects two 25-basis point cuts in 2025, Powell reiterated that future policy decisions will be based on incoming data. He emphasized that the Fed’s stance remains flexible and data-dependent—essentially unchanged from May’s meeting—where inflation concerns remain the decisive focus for Fed.

June Summary of Economic Projection

The market also focused on the Fed’s latest SEP and dot plot. Although the median projection still calls for two rate cuts in 2025, the Fed officials views are split. Seven officials expect no cuts at all next year, while the majority favor two or more. 

Powell downplayed the importance of these projections, calling them “weak signals” and reinforcing that actual policy will depend on economic developments.

Over the Economic Projection, The Fed made notable downward revisions to its 2025 economic forecasts compared to March:

• GDP Growth: Lowered to 1.4% (from 1.7%)
• Unemployment: Raised slightly to 4.5% (from 4.4%)
• Headline PCE Inflation: Revised up to 3.0% (from 2.7%)
• Core PCE Inflation: Increased to 3.1% (from 2.8%)

These projections signal slower growth and higher inflation expectations, reinforcing the Fed’s cautious approach to easing. With tariffs and global tensions clouding the outlook, the path to rate cuts remains uncertain.

What’s Next for the Fed?

The Federal Reserve remains cautious on inflation, as reflected in its upward revision of inflation forecasts. This suggests the Fed is not in a hurry to cut rates, especially after holding steady for the fourth consecutive meeting.

That said, rate cuts are still on the table—most Fed officials continue to project two cuts in 2025. For the Fed to move forward with easing, incoming inflation data will need to show clear signs of moderation. In particular, a softer PCE inflation reading and reduced tariff-related risks would strengthen the case for a cut.

According to the CME FedWatch Tool, markets are currently pricing in a 59.3% chance of a rate cut at the September meeting.

Technical Outlook: U.S. Dollar & S&P 500

U.S. Dollar Index (DXY)

The U.S. Dollar saw a modest rebound following the Fed meeting, but the move was limited—highlighting continued market indecision. Traders appear to have largely priced in the Fed’s cautious tone, with no major surprises delivered.

From a technical perspective, the Dollar Index continues to trade below the key 99–100 resistance zone. This suggests that dollar bulls remain hesitant, and unless the dollar reclaim ground above this level, the broader outlook for the dollar remains under pressure.

S&P500 (SPX500)

The S&P 500 ended slightly lower following the FOMC meeting, as investors digested the Fed’s cautious tone and updated economic projections. Despite the mild decline, the index continues to trade with minimal volatility near record highs—reflecting a cautious but steady sentiment.

On the daily chart, the index is consolidating near the psychological 6,000 level. However, recent price action suggests a potential breakdown from a rising wedge pattern, with the price struggling to hold above 6,000.

A confirmed break below the 6,000 range could signal a deeper pullback, with the next support levels seen around 5,800 and 5,700. On the upside, reclaiming and holding above 6,000 would be key to resuming bullish momentum.