Federal Reserve Chairman Jerome Powell testifies at a hearing of the Senate Committee on Banking, Housing, and Urban Affairs entitled “Semi-Annual Monetary Policy Report to Congress” at the Dirksen Building on Thursday, March 7, 2024.
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Despite improved economic growth prospects, Fed members still expect three interest rate cuts in 2024.
Federal Open Market Committee March predict The rate cut chart, or “dot plot,” shows the median federal funds rate in 2024 at 4.6%. The current range of the federal funds rate is 5.25% to 5.50%, and the dot plot means three interest rate cuts, each of which is 0.25 percentage points.
The previous summary of economic forecasts in December also pointed to three interest rate cuts in 2024.
However, March forecast a 2.1% change in real GDP for 2024, up from 1.4% in December. The core personal consumption expenditures inflation forecast also rose to 2.6% from 2.4%.
The latest forecasts come after a series of inflation reports in January and February that dampened the Fed’s hopes of reining in rising prices. Ahead of the central bank’s latest news on Wednesday, traders had begun to trim expectations for rate cuts this year.
“Despite the core PCE forecast increasing 0.2 percentage points to 2.6%, the FOMC’s SEP will still cut interest rates this year (0.75%). We believe this is the most relevant conclusion in the SEP as it indicates that Ian, head of U.S. rates strategy at BMO Capital Markets Ian Lyngen said monetary policymakers were ignoring the possibility of upward inflation that materialized earlier this year.
Federal Reserve Chairman Jerome Powell said at a news conference on Wednesday that the central bank did not completely deny the latest inflation report, but also said that January’s data may be distorted by seasonal factors.
“I put the two together and I don’t think they really change the overall picture, which is that inflation is gradually declining on a sometimes bumpy road toward 2%,” Powell said.
There are some minor changes in the dot plot. In December, greater divisions emerged among individual members, with two FOMC voters saying there would be zero rate cuts in 2024 and another saying six rate cuts would be implemented. The most aggressive forecasts have fallen back to March forecasts with just four cuts.
Additionally, the median forecast for the federal funds rate in 2025 rose to 3.9% from 3.6%, meaning one fewer rate cut.
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