FOMC Targeted Funds Rate Range Is Unchanged
by:Tom Moeller
|in:Economy in Brief
Summary
- FOMC Committee expects funds rate to gradually fall over forecast period.
- Projections of economic growth are lowered, but expected inflation is raised.
At today’s meeting of the Federal Open Market Committee, the target range for the Fed funds rate was left unchanged at January’s 4.25% to 4.50% level. This followed reductions at three consecutive meetings in the fall of 2024. Rates remain below the high of 5.25% to 5.50% in place in mid-September. Today’s target range matched expectations in the Action Economics Forecast Survey.
The statement following the meeting reiterated the comment after the last meeting. “Recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain solid. Inflation remains somewhat elevated.”
Also unchanged were comments on the outlook. “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 roughly in balance.”
The Fed continued, “Beginning in April, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $25 billion to $5 billion. The Committee will maintain the monthly redemption cap on agency debt and agency mortgage-backed securities at $35 billion.
At today’s meeting, the Fed updated its economic projections. “Each participant’s projections were based on information available at the time of the meeting, together with her or his assessment of appropriate monetary policy—including a path for the federal funds rate and its longer-run value—and assumptions about other factors likely to affect economic outcomes.”
Expected real GDP growth Q4/Q4 was lowered to 1.7%, 1.8% and 1.8% from 2.1%, 2.0% and 1.9% in 2025, 2026 and 2027, respectively. The unemployment rate projection for Q4 2025 was raised to 4.4% from 4.3%, then left unchanged at 4.3% by the end of 2026 & 2027. The y/y PCE price inflation outlook for Q4 2025 was raised to 2.7% from 2.5%, then raised to 2.2% from 2.1% in 2026 and left unchanged at 2.0% in Q4 2027. Expected core PCE inflation for 2025 Q4/Q4 was raised to 2.8% from 2.5%, but 2026 & 2027 expectations were left at 2.2% & 2.0%.
The projected year-end Fed funds rate forecast was left unchanged at 3.9% for this year, 3.4% in 2026 and 3.1% in 2027.
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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