Institutional Outlook on the Federal Reserve SEP and Dot Plot Changes: Wash's First Dot Plot Sparks Suspense, Inflation May Be Revised Upward, Rate Cuts Could Be Delayed

BlockBeats News, June 18 — Several institutions preview the changes in the Federal Reserve's SEP and dot plot, focusing on whether new Fed Chair Kevin Warsh will submit a personal dot plot forecast, and whether inflation expectations will be revised upward or the rate cut path delayed. UBS expects the Fed to raise inflation forecasts, with most members believing rate cuts before 2028 are inappropriate, and the median of the dot plot may show a rate cut in 2028, but policy stance will remain tightening. Goldman Sachs predicts the median of the dot plot will show rates remaining unchanged in 2026, with the final forecast still indicating one rate cut each in 2027 and 2028; economic forecasts for 2026 may show slight declines in GDP growth and unemployment rate, with inflation significantly revised upward.

Barclays expects the latest dot plot to reflect higher inflation expectations and a more cautious policy stance, meaning rates will stay unchanged throughout 2026, only one rate cut in 2027, and no change in 2028. Bank of New York Mellon predicts the dot plot will show a slight hawkish adjustment, with the median forecast likely canceling the previous expectation of one rate cut before the end of 2026. Pacific Investment Management Company expects the dot plot to shift significantly hawkishly, with several rate hike predictions in 2026, but the median still shows no change.

Regarding whether Warsh will submit a personal forecast, opinions vary among institutions. Goldman Sachs, CapIQ Macro, TD Securities, and Bank of America expect Warsh may not submit a personal dot plot forecast. TD Securities believes this may be a strategic move to minimize the hawkish signals that the June dot plot might release. Bank of America thinks Warsh's reason for not submitting a personal forecast is that he does not believe in forward guidance, and expects economic growth forecasts to be revised downward to 2.1%, with inflation significantly revised upward. JPMorgan expects Warsh to submit a personal forecast; otherwise, it would seem like a clear dissent from the committee he leads. Jefferies states that Warsh has already explicitly expressed disagreement with forward guidance at a Senate hearing, which will be the biggest change, possibly reflected in a shorter FOMC statement and fewer SEP details. (Jin10)