Outlook Mild economic headwinds may put a cap on positive growth surprises for the remainder of 2025. In keeping the overnight lending rate target (Fed Funds rate) at 4.25% to 4.5%, the Federal Reserve has maintained a somewhat hawkish posture, given that most measures of inflation are approximately 2% lower than overnight lending rates. A hawkish posture, while keeping inflation in check, tends to keep growth in check as well. Further, both initial and continuing unemployment claims have been trending higher, indicating increased caution among employers.1 Despite the headwinds, we still believe the economy will grow overall for the year, given the solid overall health of the U.S. consumer, businesses, and the banking system. . . . Much of the focus last week centered around the monetary policy meeting, specifically on Fed Chairman Jerome Powell’s remarks about the economy, future expectations for growth and inflation, along with potential impacts of tariffs. The Federal Reserve concluded its June Federal Open Market Committee (FOMC) meeting on Wednesday, maintaining the target Federal Funds rate in the range of 4.25 – 4.50%, where it has been since December.2 The Fed Funds rate has been lowered by 100 basis points in the past year, but there have been no rate cuts in 2025. The move was widely expected and marks the fourth consecutive meeting of pauses. Fed officials have been consistent in their messaging, stating they are taking a cautious approach, particularly when it comes to gauging the potential economic impact of tariffs. Along with the rate decision, the Federal Reserve updated the “dot plot” projections to provide insight into the Fed’s rate cut decisions, future expectations for rates, and its outlook on the economy.3 The closely watched dot plot showed the central bank stuck with its forecast for two rate cuts this year. However, policymakers expect to see inflation remain elevated and lower economic growth ahead. Additionally, more policymakers voted for no rate cuts this year, 7 out of 19 (previously only 4 in March). However, the policy statement pointing to two rate cuts this year was approved unanimously by the committee. While the dispersion in projections indicates some uncertainty from Fed officials about future cuts, the average outlook points to a fed funds rate of around 3.4% in 2027. Overall, the projections suggest a gradual easing of monetary policy over the next couple of years, while currently remaining restrictive. Other plots indicate potential pressures, with participants revising the gross domestic product (GDP or “economic growth”) forecast to increase by 1.4% in 2025, while inflation sits at 3%. The revision represents a 0.3% reduction in GDP. This may be reflective of the negative growth print in Q1, largely due to a pull forward in imports (which is subtracted from the growth calculation). During the press conference, Fed Chairman Jerome Powell suggested, “For the time being, we are well-positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policies”. The equities market reacted little to the news and finished the week roughly flat, with some impact from geopolitical tensions. For the week, the Dow Jones remained unchanged, the S&P 500 was down 0.2%, while the Nasdaq Composite was up 0.2%. | 
