Fed continues pause, ‘dot plot’ projections swing dovish
As widely expected, the Fed left interest rates unchanged at a range of 5.25% to 5.50% for a third consecutive meeting. The post-meeting statement noted inflation “has eased over the past year,” and said officials would watch the economy to see if “any” additional rate hikes are needed, implying the tightening cycle has likely come to an end. New economic projections show a dovish switch with 17 of 19 Fed officials projecting rates will be lower by the end of 2024 – with the median projection signaling rates falling 75 basis points. That’s a notable shift in tone and outlook to dovish.
The median economic projections now signal 2.6% GDP growth this year (2.1% in September), falling to 1.4% next year (1.5%) and then rising to 1.8% (unchanged) in 2025 and 1.9% in 2026 (1.8%). Core PCE inflation is projected to be 3.2% this year (3.7% in September), 2.4% in 2024 (2.6%), 2.2% in 2025 (2.3%) and reach the target of 2.0% in 2026 (unchanged).
The economic projections, as a whole, portray a “soft landing” scenario, which officials have repeatedly predicted.
Fed Chair Jerome Powell said the word “any” was added to the post-meeting statement about further rate hikes to show officials believe the tightening cycle is likely near an end, without completely taking that off the table. But Powell noted it’s not likely the Fed will raise rates further and said officials are now thinking and talking about when it will be appropriate to cut rates.
