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Federal Reserve’s policy path points to a rate cut in June

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Our modified Taylor Rule implies that the federal funds policy rate should be reduced to a range between 4.75% and 5% in the near term which underscores our call for the Federal Reserve to reduce its policy rate at the June meeting.

Given our forecast of a modest 2.1% pace of growth this year, a cut in June is aligned with our call of three rate cuts this year.

Read more of RSM’s insights on the economy and the middle market.

While the U.S. economy continues to outperform its peers, a combination of a rules-based approach and discretion strongly implies that the federal funds rate is currently restrictive. If maintained, it will result in rising real rates and tip the economy toward higher unemployment and lower growth—below the long-term trend of 1.8%—than would otherwise be necessary.

Federal funds rate vs. Taylor Rule

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About Joseph Brusuelas

@JoeBrusuelas

Joe Brusuelas, “chief economist to the middle market,” is the preeminent voice championing issues and policies facing midsize companies in the United States and around the world. An award-winning economist, Brusuelas has more than 20 years’ experience analyzing U.S. monetary policy, labor markets, fiscal policy, international finance, economic indicators and the condition of the U.S. consumer.

A member of the Wall Street Journal’s forecasting panel and the UCLA Anderson School of Management's Board of Directors, Brusuelas regularly briefs members of Congress and other senior officials regarding the impacts of federal policy on the middle market and the factors by which middle market executives make business decisions. He also frequently offers his insights on the U.S., Canadian and global economies in the financial media. In 2020, he was named one of the 100 most influential economists by Richtopia. In December 2023, Brusuelas and the economics team were recognized on Bloomberg's list of Best Bond Forecasters after correctly predicting where the benchmark Treasury would end the year.

Before joining RSM in 2014, Brusuelas spent four years as a senior economist at Bloomberg L.P. and the Bloomberg Briefs newsletter group, where he co-founded the award-winning Bloomberg Economic Brief. Earlier in his career, he was a director at Moody's Analytics covering the U.S. and global economies for the Dismal Scientist website. He also served as chief economist at Merk Investments L.L.C. and chief U.S. economist at IDEAglobal.

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