Hello my friends, so today is June 18th and this is my FOMC debrief. So I'm on the road today, so that's why this video is a little bit late, but to be honest you guys didn't miss anything. So before we talk about what happened today, let's level set a little bit. Now between today and the last FOMC meeting, I'd say we had some you know some meaningful developments. Particularly of course we had liberation day, we had the pivots and now we have geopolitical risk.
Now looking at the data the past few months, data has actually been pretty good from the Fed's perspective, focusing on inflation. Inflation has come in softer than expected and headline PCE, which is what the Fed looks at was only 2.1% year over year in April. On the employment front, we continue to create jobs. So that seems okay, but of course there are some weaknesses in the labor market. Be continuing claims continues to increase. So that means when people lose their job, it's harder and harder for them to find new jobs.
And of course it seems like new graduates are having a harder time finding employment. So labor market is weakening, but it's still okay. Now one of the things that Sherpow has been focused on was inflation expectations. So if you go to economist school, you think inflation expectations are really important because once they become the anchor, or so once they trend higher, you know, maybe that impacts action inflation.
So they tend to think that if inflation expectations drip higher, realized inflation, action inflation goes higher as well. And so they were really concerned when many surveys were showing that inflation expectations for some parts of the population were very, very high. They were scared about tariffs. But after Trump's pivot, we see that surveys on inflation expectations have come down. So for a lot of people, me included, me included looking at so training lower inflation, lower inflation expectations, softening labor market, I tend to think that it's time to be thinking about cutting.
Heading into this meeting, the market was only pricing at two cuts. Now this meeting was special because it's a quarterly meeting and so we also get a dot plot. So we get to have a better view as to how the FOMC is thinking about the economy. So okay, let's turn to what happened at the meeting. So first off, looking at the dot plot, the dot plot was a bit surprising to me. It was surprising to me because it was somewhat stagnationary.
So the dot plot showed lower expectations for growth this year and also revising up a bit inflation from 2.7% to 3% at the end of the year and revising the unemployment rate a bit higher from 4.4% to 4.5%. So all in all, this is the fetus being a bit more downbeat on the economy and the median fed FOMC participants continue to expect two cuts this year in line with market expectations. And there's quite a number of them who don't even expect any cuts this year.
So that's basically where we are and moving on to the conference. You know, yeah, and it's kind of the rehash of what we've been talking about. What the fed's been talking about for the past few months. You know, they just don't know what's going on. Just going to wait and see. Now, it's your pile seems to think that the labor market is pretty good.
So although there are signs that things are softening, things were basically at full employment and because the labor market so strong, he feels confident that we can just wait around and see how inflation turns out. Now, one thing I thought was pretty interesting was that, you know, why aren't you going to cut? I mean, and his point was that, you know, if you look, if you're looking backwards, the data has been good the past few months.
So yeah, you should be cutting, but he wants to look forward. And according to professional forecasters and I guess the fed themselves, inflation is expected to rise in the coming months as tariffs filter through into the economy. And that's totally reasonable. But I think it's also a bit surprising for him to have so much reliance on the quote unquote professional forecasters who honestly have been wrong a lot. Sometimes hugely and it doesn't really seem like Powell's style.
I mean, he's a smart person. He knows that these models are for reference only, but he seems to be placing a lot of stock in them or at least agreeing with them. I don't know how he actually thinks about this other than what he tells me. So that's where we are just just waiting to see until the labor market cracks.
And then when the labor market cracks, then we will get cuts. And maybe we'll have more inflation as tariffs filter through. Although if you look at the inflation data lately, it does seem like inflation is filtering a little bit through. But remember, the inflation index is mostly services and say 40% goods. When we have tariffs, that impacts goods.
And if you have goods inflation but a softening labor market, putting down repression on services inflation, usually that depends on the extent. But so far, just as of the last print, it seems like the services this inflation has been stronger. One other thing that I would point out is that this morning, President Trump was asked about Fedshire Powell and basically mentioned that he was a stupid person and even suggested that, hey, maybe he could appoint himself to be Fed Chair.
Now, that's something else that we should keep in mind. And that makes the Fed matter even less. Now, we've been talking about this for some time and that we should focus less on the Fed because there's so many other moving parts that are becoming more important. Fiscal spending, for example, and now geopolitical stuff and also how the White House is conducting trade policy, which is within their purview. These are all things that are much more important than the Fed, who is on hold.
But even looking at the Fed, this Powell Fed is going to become less important because in the coming months, Trump is going to appoint his own person. And that person is going to be a Trump guy and he's going to like easy money. Now, all these people were worried about independence of the Fed that the that Powell will get fired by Trump.
But like I mentioned before, eventually, eventually Trump is going to get his person as Powell's term expires. So I think we should focus more on that in the coming months. In any case, Fed meetings are very boring now guys. Go watch and see what's happening in geopolitics. That's that's what's going to be moving the markets. All right, talk to you all this weekend.