It wasn’t so long ago when markets were holding out hope for a rate cut at the June FOMC meeting.

Now that you mention it, it wasn’t all that long ago when traders had the March meeting priced as a near lock for the first cut.

Alas, the US economy outperformed and the labor market kept adding jobs, damn it all to hell.

I’m just joking. It’s about inflation. The proverbial “last mile” down to 2%’s proving to be every bit as arduous as officials feared it might be. Critics insist the Fed’s dovish pivot in Q4 contributed to a succession of upside CPI surprises to start the new year. Maybe that’s true, maybe it isn’t, but the Committee was ultimately forced into another about-face. “Higher for longer” became the mantra again. Just in time for the data to start missing the mark.

Headed into the May jobs report, Q2 GDP tracking halved on one popular “nowcast” and “surprise” indexes retreated to their lowest levels in over a year. The world’s largest economy was finally starting to underperform — relative to consensus anyway. Then came another blockbuster NFP headline accompanied by a warm read on (seasonally adjusted) wage growth.

What to make of it all if you’re the Fed? Most officials still believe some version of the “long and variable lags” narrative and notwithstanding the NFP headline, recent data supports the idea that the economy’s downshifting. Even the jobs report admitted of more than a little nuance: The unemployment rate sported a four-handle for the first since January of 2022, the participation rate fell and the household survey showed the second-biggest drop since the original pandemic payrolls purge.

Given that, the Committee can probably skate by with a few strategic statement tweaks and a mark-to-market exercise for the dot plot.

Depending on Wednesday morning’s CPI release, the Fed may want to adjust the last line of the first paragraph in the statement — the bit about “a lack of further progress” toward the inflation objective “in recent months.” They shouldn’t drop that language altogether, though. That’d send a dovish message when officials probably want to skew hawkish. Maybe they can replace it with some other allusion to sticky inflation. The Committee could also adjust the first sentence in the opening passage if they’re inclined (“solid” to “moderate” maybe as a description of economic activity). The second paragraph’s fine as it is.

On the forward guidance, it’s hard to see a rationale for changing it. The Fed leaned pretty hard this year into the whole “we need more confidence” messaging vis-à-vis the durability and sustainability of the disinflation trajectory. The Committee hasn’t received any unequivocally bad news on the inflation front since the May meeting, but they haven’t received any unequivocally good news either, and certainly nothing that’d bolster policymakers’ confidence in the “appropriateness” of rate cuts. Even a below-consensus CPI release on Wednesday morning won’t change that.

The core PCE overshoot’s 75bps. The key here is that the economy and labor market are still performing. If that weren’t the case, a 75bps core PCE overshoot probably wouldn’t be sufficient to dissuade rate cuts, but no matter how badly Jerome Powell might want to move, he doesn’t have the air cover.

Of course, the Fed doesn’t need to (and almost surely won’t) wait until every inflation metric is back to 2% to lower rates. Critics who insist on that (tacitly or otherwise) are being disingenuous. The issue is that current-quarter GDP’s tracking in excess of 2% even after halving and the unemployment rate’s 4% after rising 0.6ppt from the lows. In other words, yes, the economy may be slowing and the labor market loosening, but from a scorching pace and the tightest conditions ever, respectively. The Fed has to be careful not to re-stoke the bonfire. Their confidence that the economy’s slowing is about as strong as their confidence that inflation’s on a sustainable path back to 2%, which is to say insufficient to seriously consider cutting rates.

The best approach (for the Fed) to the June policy gathering may be this: Let the SEP do the talking. That’s an odd assessment coming from me. I’m no fan of forecasts, and just like everyone else in the world, I think the dot plot’s asinine. But the median 2024 marker will certainly shift up, likely to reflect two cuts (versus the previous three) and maybe just one. If it does reflect two, enough of the “dissenting” dots will show one (or none) to get the message across. It’s possible (likely) that the PCE forecasts for 2024 will shift up by a tenth or so.

I can’t bring myself to fret over the out-year markers and forecasts other than the long run dot (i.e., the neutral dot). The r-star discussion’s highly topical, and it’s plain (to this observer anyway) that it’s higher in the post-pandemic era. But even if the long run dot were to shift up again, it’d be another token nudge. There’s no chance that a majority of the Committee will just up and revise their implied estimates of neutral by 50bps (or something) all of a sudden.

Powell’s press conference will probably be some manner of train wreck. He’ll be subjected to questions he doesn’t want to answer like, “Some of your colleagues have suggested the Fed could raise rates again. Is it still your view that the next move is unlikely to be a hike?” And so on. For a lawyer, Powell doesn’t think well on his feet, or at least not when the questions are about monetary policy and the task at hand is to gauge, in real time, how a given turn of phrase will impact asset prices.

I’ve said this dozens of times if I’ve said it once: The Fed should scrap the SEP and the press conferences and just release a statement after each policy meeting. The same for every other developed market central bank. We’re kidding ourselves to suggest the general public has a better understanding of monetary policy as a result of incessant central bank communications. Everyday people can’t even tell you what central banks do.

The idea that Main Street’s tuning into these press conferences is completely ridiculous, as is the notion that Main Street’s reading about them later. When was the last time a central bank press conference was the top trending article on a news site not dedicated to finance? Never. Never was the last time.

Just to drive home the point: I personally guarantee that roughly half the readers who started this article didn’t finish it because it was “too” long (“TL;DR”), because there weren’t “enough” charts or both. I’d be concerned about offending those readers except that… well, they didn’t make it this far! And this is an audience that’s avowedly interested in monetary policy. Less is more in the era of diminished attention spans, particularly when more has the potential to confuse the issue. I still haven’t learned that. The Fed hasn’t either.