The Fed’s scatter plot shows only two rate cuts in 2025, fewer than previously forecast

The Fed’s scatter plot shows only two rate cuts in 2025, fewer than previously forecast


U.S. Federal Reserve Chairman Jerome Powell speaks during a news conference following a two-day Federal Open Market Committee meeting on interest rate policy in Washington, U.S., November 7, 2024.

Annabelle Gordon | Reuters

According to the central bank’s median interest rate forecast, the Federal Reserve on Wednesday forecast just two quarter-point interest rate cuts in 2025, fewer than previously forecast.

The so-called dot plot, which indicates individual members’ interest rate expectations, showed that officials expect their key interest rate to fall to 3.9% by the end of 2025, a target range of 3.75% to 4%. Previously, the Fed had forecast four quarter-point cuts and one full percentage point reduction in 2025 at a meeting in September.

The committee met at the Fed’s final monetary policy meeting of the year on Wednesday cut the federal funds rate to a target range of 4.25% to 4.5%.

A total of 14 of 19 officials planned two rate cuts of a quarter point or less in 2025. Only five members predicted more than two rate cuts next year.

Assuming quarter-point increases, officials predict two more cuts in 2026 and another in 2027. Longer term, the committee expects the “neutral” key rate to be 3%, 0.1 percentage points higher than the September update, a level that has already been gradually increasing this year.

Here are the Fed’s latest targets from 19 FOMC members, both voters and non-voters:

The forecasts also showed slightly higher inflation expectations. Headline and core inflation forecasts using the Fed’s preferred measure were raised to 2.4% and 2.8%, respectively, compared with September estimates of 2.3% and 2.6%, respectively.

The committee also raised its forecast for full-year gross domestic product growth to 2.5%, half a percentage point higher than in September. However, officials expect GDP to slow to the long-term forecast of 1.8% in the following years.

As for the unemployment rate, the Fed cut its estimate to 4.2% from 4.4% previously.

—CNBC’s Jeff Cox contributed reporting.



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