Federal Reserve Chairman Powell speaks at a press conference after the two-day Federal Open Market Committee interest rate policy meeting in Washington, the United States, on November 7, 2024.
Annabel Gordon | Reuters
The Federal Reserve on Wednesday projected only two quarter-percentage point interest rate cuts in 2025, according to the central bank’s medium-term interest rate forecasts, lower than previously expected.
The so-called dot plot, which shows individual members’ interest rate expectations, shows officials expect the benchmark lending rate to fall to 3.9% by the end of 2025, equivalent to a target range of 3.75% to 4%. , a cut of four quarter percentage points, or a full percentage point, is expected in 2025.
At the Federal Reserve’s final policy meeting of the year on Wednesday, the committee lowered the overnight borrowing rate to a target range of 4.25%-4.5%.
A total of 14 of the 19 officials expected two or fewer rate cuts in 2025.
Assuming a quarter-percentage point increase, officials said there would be two more rate cuts in 2026 and one more in 2027. 0.1 percentage points higher, a level that has gradually moved higher this year.
Here are the Fed’s latest goals proposed by 19 FOMC members (including voters and non-voters):
Forecasts also show slightly higher expectations for inflation. According to the Fed’s preferred indicator, forecasts for headline and core inflation were raised to 2.4% and 2.8% respectively, compared with September forecasts of 2.3% and 2.6%.
The committee also raised its full-year gross domestic product growth forecast to 2.5%, half a percentage point higher than in September. Over the next few years, however, officials expect GDP to slow to the long-term forecast of 1.8%.
As for the unemployment rate, the Fed lowered its forecast to 4.2% from the previous 4.4%.
—CNBC’s Jeff Cox contributed reporting.
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