What Happened? 

The widely watched June FOMC meeting concluded on Wednesday, 12 June. Again, the Fed kept its benchmark interest rates unchanged at 5.25% to 5.5%. The Fed officials signalled just one interest rate cut this year and projected another four cuts in 2025. Source: Bloomberg. FOMC dot plot as of June 12, 2024. Despite keeping the rates unchanged, the Fed made subtle changes in its post-meeting statement. The central bank noted that the economy is making “modest further progress toward the committee’s 2% inflation objective”. In contrast, its previous statement highlighted a “lack” of further progress. This shift in language suggests a cautiously optimistic outlook from the Fed regarding the inflation trajectory.

The Immediate Market Reactions

Both equities and bonds reacted positively to the FOMC announcements and soft inflation data. The S&P 500 Index staged a strong rally and hit a fresh high of above 5,400....