FOMC Holds Funds Rate Steady as Expected
by:Tom Moeller
|in:Economy in Brief
Summary
- Federal funds rate range remains at 5.25% - 5.50%, where it’s been since early August.
- Rate stays at highest level since March 2001.
- Fed maintains focus on inflation reduction.
At today’s meeting of the Federal Open Market Committee, the target range for the Federal funds rate was left unchanged at 5.25% - 5.50%. It was raised in August from a range of 5.00% - 5.25%. The rate has been lifted from close to zero in March 2022. Today’s action matched expectations in the Action Economics Forecast Survey.
Each member of the FOMC voted in favor of today’s action.
The Fed’s focus continues to be reducing price inflation, as mentioned several times in the meeting summary.
Text accompanying today’s meeting indicated, “Recent indicators suggest that growth of economic activity has slowed from its strong pace in the third quarter. Job gains have moderated since earlier in the year but remain strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated.”
The Fed again stated, “The U.S. banking system is sound and resilient. Tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks.”
In addition, the Fed again wrote, “the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans. The Committee is strongly committed to returning inflation to its 2 percent objective.”
At this meeting, the Fed released economic projections (4Q/4Q) of moderate economic growth (1.4% to 1.9%) from 2024 through 2026. These figures are little changed from the last meeting, though the 2023 forecast was raised to 2.6% from 2.1%. The unemployment rate forecast was unchanged from 4.1% through 2026, which is higher than 3.8% at yearend 2023. Core PCE price inflation is expected to decline to 2.0% by Q4’26 from 3.2% at yearend 2023, revised from 3.7%. The Fed funds rate is expected to decline steadily to 2.9% by yearend 2026 from 5.4% in Q4’23.
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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