FOMC

"We could do this as early as July," Waller said Friday in a televised interview.

The FOMC's decision to "hold rates steady while signaling only two cuts this year was a subtle but powerful shift," said James Pruskowski, CIO at 16Rock Asset Management.

The panel is not expected to change rates, but the dot plot will be watched to see if the Fed's prior projection of two rate cuts this year holds.

The Federal Open Market Committee will meet on June 17-18. While no rate cuts are expected at this point, things can change quickly. Lauren Saidel-Baker, economist at ITR Economics, provides her take on the meeting the new Summary of Economic Projections and Fed Chair Jerome Powell's press conference.

Muni yields remain attractive, said Tom Kozlik, managing director, head of public policy and municipal strategy at HilltopSecurities.

"The threat of having both inflation and unemployment rising simultaneously continues to create a big headache for the Fed's interest policy," said Wells Fargo Investment Institute global fixed income strategist Luis Alvarado.

The specter and economic implications of tariffs coupled with still above-target inflation and a healthy labor market will sideline policymakers at this week's meeting, analysts said, but not everyone agrees when the next rate cut will be.

Get expert analysis of the May FOMC meeting, inflation outlook, and Powell's comments.

Most of Thursday's issuance came from competitive deals, the largest being the Dormitory Authority of the State of New York with $2 billion-plus and California with $889 billion.

With no policy changes expected, analysts are eagerly awaiting the new Summary of Economic Projections for clues about future monetary policy.

Mike Goosay, Chief Investment Officer of Global Fixed Income at Principal Asset Management, breaks down the Federal Open Market Committee meeting, Chair Powell's press conference and the SEP.

Investors added $741.7 million to municipal bond mutual funds in the week ending Wednesday, following $2.078 billion of inflows the prior week, according to LSEG Lipper data.

"There are a lot of moving parts here with the potential to either help or hinder the Fed's quest for price stability and maximum employment" this year, noted BMO Deputy Chief Economist Michael Gregory, who says the Fed will "stand pat."

The Federal Reserve will be more cautious and slow rate cuts going forward, according to minutes of the December Federal Open Market Committee meeting, released Wednesday.

Investors pulled more from municipal bond mutual funds in the final reporting week of 2024, but high-yield reverted to inflows to close out the year, adding to the sector's outperformance overall.

Although a new administration means policy uncertainty, most analysts see the economy growing above trend next year, although inflation will remain a concern.

While municipals have outperformed USTs on the whole in 2024, they will close December with losses. How taxables perform in early 2025 coupled with macroeconomic and Washington policy uncertainty have municipal market participants on edge for what lies ahead.

The Federal Open Market Committee cut the fed funds target again in December but signaled fewer cuts in 2025. There was some dissent. The markets are watching to see if the Federal Reserve pauses its easing cycle in January. Brian Rehling, head of global fixed-income strategy at Wells Fargo Investment Institute, recaps and parses the previous day's FOMC meeting and Fed Chair Jerome Powell's press conference.

Analysts are unsure what the Federal Open Market Committee will do with monetary policy in 2025. The panel projects two rate cuts, but some analysts expect more, and others see fewer.

As the market prepares for 2025, there's a lot of uncertainty around what the new administration will mean for the macroeconomic environment and interest rates, the latter of which may be impacted by policy around the deficit, said Steve Shutz, portfolio manager and director of tax-exempt fixed income at Brown Advisory.