Fed's Forward Guidance: SEP and Dot Plot Changes Revealed - Powell's First Dot Plot Unveiled, Inflation Upside Risk, Rate Cut on Hold

June 18 — Ahead of the Federal Reserve’s Summary of Economic Projections (SEP) and dot plot updates, numerous financial institutions are weighing in. The market’s primary focus centers on two key points: whether newly installed Fed Chair Kevin Warsh will submit his personal dot plot forecast, and whether inflation expectations will be revised upward, potentially delaying the rate cut trajectory. UBS expects the Fed to lift its inflation forecast. Most Federal Open Market Committee (FOMC) members do not view a rate cut as appropriate before 2028; the median dot currently signals a rate cut in 2028, though the policy stance will remain tight. Goldman Sachs projects the median dot will show interest rates holding steady throughout 2026, with final forecasts still indicating one rate cut apiece in 2027 and 2028. The 2026 economic outlook may include a modest downward adjustment to GDP growth and the unemployment rate, paired with a significant upward revision to inflation projections. Barclays anticipates the latest dot plot will reflect higher inflation expectations and a more cautious policy stance, meaning rates will stay unchanged for all of 2026, with only one rate cut in 2027 and holding steady in 2028. BNY Mellon forecasts a slightly hawkish tweak to the dot plot, with the median projection likely scrapping its prior expectation of a rate cut by the end of 2026. PIMCO expects a notable hawkish shift in the dot plot, with some 2026 rate hike projections surfacing, though the median still shows no change in policy. Institutions are split over whether Warsh will submit his personal forecast. Goldman Sachs, Capital Economics, TD Securities, and Bank of America all think Warsh may skip submitting his individual dot plot. TD Securities frames this as a strategic move to minimize any hawkish signals the June dot plot could carry. Bank of America adds that Warsh’s rationale for opting out is his lack of confidence in forward guidance; the firm also forecasts economic growth projections will be downgraded to 2.1%, with inflation rising sharply. JPMorgan, by contrast, believes Warsh will submit his personal forecast, arguing that not doing so would appear as a clear dissent against the committee he chairs. Jefferies notes that Warsh explicitly voiced his disagreement with forward guidance during his Senate hearing — a key potential change that could result in a shorter FOMC statement and less detailed SEP releases. (FXStreet)