🤔 The (dot) plot thickens

In an incredibly brief statement, the Federal Reserve voted to keep rates unchanged at a range of 3.5% to 3.75%, as was universally expected.

• The release eliminated any hints as to the future for policy rates. Its April statement included the phrase “in considering the extent and timing of additional adjustments to the target rate,” which was a nod to the idea that another cut was more likely than a shift towards hikes.

• At that time, three monetary policymakers dissented, preferring that this easing bias be removed. Today’s unanimous vote suggests that members are aligned on this matter, given the renewed strength in labor market data since May and the stickiness of inflation.

• Of course, hints on the outlook for short-term rates can still be divined through the dot plot, and that came out on the hawkish side.

The median Fed official thinks the policy rate should be at 3.75% if the economy evolves in line with their expectations, which implies a hike is seen as more likely than a cut. Wall Street had anticipated that the 2026 dot would rise to only 3.625% from 3.375%. The S&P 500 and Nasdaq sold off following the statement and projections; Treasury yields rose. Stocks pared some of their losses during new Chairman Kevin Warsh’s press conference.

The Takeaway

Warsh has often suggested that the central bank over-communicates with markets, and his proclivity for brevity is reflected in today’s press release. During the press conference, he positioned himself as a reformer, outlining different task forces he’s establishing in an attempt to improve the conduct of monetary policy and economic outcomes.

Prediction markets now see a hike in July as more likely than a cut, a reversal of what was priced in ahead of this event. They also price in a greater risk of an interest rate hike before the year is out, with those odds rising to about 60% from roughly 40%*.

*Event contracts are offered through Robinhood Derivatives, LLC — probabilities referenced or sourced from KalshiEx LLC or ForecastEx LLC.

Want the inside look on the stats, data, and insights going on in sports? Looking for the numbers behind the biggest stories in the World Cup? Interested in prediction markets and how to make money there? Check out Snacks’ newsletter Scoreboard. 

For instance, in yesterday’s Scoreboard:

After Monday’s “day of the draws” — just the second time in World Cup history that four ties happened on the same day — Tuesday brought the tournament into greater focus. The pregame favorites (France, Argentina, Norway, Austria) all won, and won big, at least by soccer standards — every margin was by more than 2 goals — and some of the faces of the tournament had huge days as well. Kylian Mbappé of France scored twice (us soccer aficionados call that a “brace”), as did Norway’s Erling Haaland (a Scoreboard favorite going way back). And Lionel Messi, arguably the greatest footballer ever, one-upped them both with a hat trick, netting each of Argentina’s 3 goals vs. Algeria.

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It’s a huge day for the hosts tomorrow, as both Canada and Mexico have massive must-win games:

• 🇨🇿 Czechia vs. 🇿🇦 South Africa: The Czechs have a 55% chance of a win,* while South Africa is down to a 21% shot after their loss to Mexico.

• 🇲🇽 Mexico vs. 🇰🇷 South Korea: Mexico 49% to win, Korea 24%.

• 🇨🇦 Canada vs. 🇶🇦 Qatar: The Canadians have a 77% chance of victory to Qatar’s 9%. 

• 🇨🇭 Switzerland vs. 🇧🇦 Bosnia and Herzegovina: The Swiss have a 64% chance of pulling off the win to Bosnia and Herzegovina’s 15%.

• Premarket earnings: Accenture and Kroger