3 Key Takeaways From the June FOMC Meeting

1. Inflation Uncertainty 

While recent data has shown core inflation moderating, core PCE is on track to average below target at just 1.6% annualised over the past three months.

Federal Reserve Chair Jerome Powell made clear that concerns about future inflation, especially from tariffs, remain top of mind.

“If you just look backwards at the data, that’s what you would say… but we have to be forward-looking,” Powell said. “We expect a meaningful amount of inflation to arrive in the coming months, and we have to take that into account.”

While the economy remains strong enough to buy time, policymakers are closely monitoring how tariff-related costs evolve before shifting policy. 

Powell also stated that without these forward-looking risks, rates would likely already be closer to the neutral rate, which is a full 100 basis points from current levels.

2. The Unemployment Rate anchor

Powell repeatedly cited the 4.2% unemployment rate during the press conference, mentioning it six times as the primary reason for keeping rates in restrictive territory. At this level, employment is ahead of the neutral rate.

“The U.S. economy is in solid shape… job creation is at a healthy level,” 

Powell added that real wages are rising and participation remains relatively strong. He did, however, acknowledge that uncertainty around tariffs remains a constraint on future employment intentions.

If not for a decline in labour force participation in May, the unemployment rate would already be closer to 4.6%. Couple this with the continuing jobless claims ticking up and hiring rates subdued, risks are building around labour market softening.

3. Autumn Meetings are Live

While avoiding firm forward guidance, Powell hinted at a timeline:

“It could come quickly. It could not come quickly… We feel like the right thing to do is to be where we are… and just learn more.”

This suggests the Fed will remain on hold through the July meeting, using the summer to assess incoming data, particularly whether tariffs meaningfully push inflation higher. If those effects prove limited and unemployment begins to rise, the stage could be set for a rate cut in September.