Going into this week's Federal Reserve FOMC meeting, the market was only giving a roughly 20% chance of a rate cut. The general expectation was that the FOMC would choose to keep rates steady but relax the language in its statement, thereby paving the way to cut rates at the next meeting in July.

Well, we just heard the Fed's decision. Here's a rundown of the FOMC's interest rate decision and the closely watched statement, as well as the dot plot and economic projections that can give valuable clues about future interest rate moves.

Exterior of Federal Reserve building entrance.

Image source: Getty Images.

No rate cut yet

First, the headline news. As the majority of experts had expected, the FOMC held the federal funds rate steady. In simple terms, there was no rate cut.

The FOMC has held rates steady thus far in 2019, with a target federal funds rate range of 2.25% to 2.50%.

Here's what changed in the Fed's statement

The key word the market had been looking for was "patient." Previously, the FOMC said that it would be patient when it came to future interest rate movements, and the removal of this word would clear the way for the Fed to start cutting rates.

Well, just as with the interest rate decision, the experts were right. The word "patient" has been removed. The phrase "the Committee will be patient" has been replaced with "the Committee will continue to closely monitor..."

In addition, the Fed calmed its language down elsewhere in the statement. For example, the Fed changed its characterization of the economic growth rate from "solid" to "moderate."

What is the dot plot projecting now?

Along with its June statement, the FOMC also released the latest version of its dot plot, which shows where the committee's voting members see rates going for the rest of 2019 as well as in 2020, 2021, and beyond.

Previously, the most recent dot plot (March) indicated that the FOMC was expecting no rate activity at all in 2019, one rate hike in 2020, none in 2021, and another hike at some unspecified time beyond 2021.

The dot plot is still projecting no interest rate movements in 2019, one cut in 2020, and an interest rate hike back to current levels in 2021.

More significant is how divided the members seem to be. Of the 17 members who gave their projections, 8 see no rate cuts at all for 2019, while 7 see two rate cuts coming later this year.

How did the Fed's economic projections change?

The other major piece of information from the Fed meeting is the members' economic projections. Here's a rundown of the key numbers:

  • The Fed sees 2019 GDP growth at 2.1%, the same as it did in its March projections. However, the 2020 GDP growth forecast has been trimmed a bit, 1.9% versus 2%.
  • Year-end unemployment is seen at 3.6%, a slight improvement from the 3.7% members previously projected. 2020 and 2021 unemployment projections were also reduced by the same margin.
  • Perhaps most significantly, the Fed now sees inflation at just 1.5% for 2019, down significantly from the March projection of 1.8%.

The key takeaways for investors

In a nutshell, the FOMC gave investors exactly what they had been looking for. The federal funds rate was held steady, the statement set the committee up for a July rate cut, and economic projections and the dot plot were largely in line with expectations.

Much of the U.S. economy remains strong, but thanks to a lack of growth and inflation, the first rate cut in a decade could be right around the corner.