manassanant pamai
Federal Reserve officials now expect to start cutting interest rates three times next year, according to the U.S. central bank’s Summary of Economic Projections released Wednesday. While the new projection implies fewer cuts than what the markets have priced in, it means that the Fed is moving closer to easing.
In the September median projections, policymakers had forecast one last rate increase for 2023, followed by two cuts in 2024. But, for the third straight meeting, the policy-setting Federal Open Market Committee held the federal funds rate steady at 5.25%-5.50%, the highest level in 22 years, amid progress on the inflation battle.
The revised outlook came from the Fed’s so-called dot plot, a closely scrutinized scatter chart of expectations on the path for interest rates, through which each of the 19 members of the FOMC assign a dot for what they reckon is the midpoint of the federal funds rate’s range at the end of each of the next three years and over the longer term.
The December median dots signaled that rates will fall from 5.4% in 2023 (vs. 5.6% in September estimate) to 4.6% at the end of 2024 (vs. 5.1% in prior estimate). That’s equivalent to 75 basis points worth of cuts in 2024 alone. From there, the benchmark lending rate is expected to retreat to 3.6% by end-2025 (down from 3.9% in prior view). The median 2025 and longer-run dots each were unchanged at 2.9% and 2.5%, respectively.