CICC Predicts Hawkish Fed Stance in June FOMC Meeting

China International Capital Corporation (CICC) has expressed its expectation that the Federal Reserve will maintain a hawkish stance during the upcoming June FOMC meeting. According to CICC, the likelihood of another round of price increases in the U.S. is high in the coming months. However, this round of price hikes is expected to be more structural and one-off in nature, rather than broad-based inflation, unlike the period from 2021 to 2022.

Moderate inflation data is seen as positive news for the Federal Reserve, but officials are unlikely to make major decisions based on single-month data. The current labor market remains stable, which means the Fed does not need to rush into rate cuts. Officials might prefer to review several more data sets before making decisions.

Next week, the Federal Reserve will hold the June FOMC meeting. CICC believes that compared to the March dot plot, which did not foresee "reciprocal tariffs," the Fed may slightly revise inflation forecasts upward in June. However, due to the resilience in non-farm payrolls and the cooling of tariffs, the Fed’s assessment of growth may be more optimistic than in March. As such, Powell’s stance at this meeting may lean hawkish, potentially disappointing investors hoping for rate cuts from the Fed.