FOMC Holds Funds Rate Steady; Expects Three Cuts in 2024
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 from a range of 5.00% - 5.25%. The rate has been lifted from close to zero in March 2022.
Each member of the FOMC voted in favor of today’s action. The “dot plot,” which is constructed from anonymous projections from the 19 members of the FOMC, suggests three rate cuts in 2024.
The Fed’s focus continues to be reducing price inflation, as mentioned several times in the meeting summary.
Text accompanying today’s meeting indicated, “The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.”
“In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”
In addition, “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. GDP is expected to grow 2.1% in 2024 (raised from 1.4%), then by 2.0% in both 2025 and 2026. The unemployment rate is forecasted to be 4.0% in Q4’24, then 4.1% next year and 4.0% in Q4’26. Core PCE price inflation is projected to be 2.6% y/y by Q4’24, up from 2.4% y/y previously expected, then 2.2% y/y in Q4’25 and 2.0% y/y in Q4’26. The Fed funds rate is expected to decline steadily to 3.1% by 2026.
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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