US Federal Reserve Chairman Jerome Powell speaks during a press conference after a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, US, November 7, 2024.
Annabelle Gordon | Reuters
The Federal Reserve on Wednesday forecast just two quarter-point rate cuts in 2025, fewer than previously forecast, according to the central bank’s medium-term interest rate projection.
The so-called dot plot, which shows individual members’ expectations for interest rates, shows that officials see their benchmark interest rate falling to 3.9% by the end of 2025, corresponding to a target range of 3.75% to 4%. The Fed had previously forecast a four-quarter-point cut or a full cut in 2025 at a September meeting.
At the Fed’s final policy meeting of the year on Wednesday, the committee cut the overnight rate to a target range of 4.25%-4.5%.
In total, 14 of the 19 officials had planned a rate cut of two quarter points or less for 2025. Only five members predicted more than two rate cuts next year.
Assuming quarter-point increases, officials point to two more cuts in 2026 and another in 2027. In the longer term, the committee sees the ‘neutral’ funds rate at 3%, 0.1 percentage point higher than in the September update, a level has gradually increased this year.
Here are the Fed’s latest goals from 19 FOMC members, both voters and non-voters:
The projections also showed slightly higher inflation expectations. Projections for headline and core inflation according to the Fed’s preferred gauge were raised to 2.4% and 2.8%, respectively, from September estimates of 2.3% and 2.6%.
The commission also raised its projection for full-year gross domestic product growth to 2.5%, half a percentage point higher than in September. However, officials expect GDP to slow to the long-term projection of 1.8% in the coming years.
On the unemployment rate, the Fed lowered its estimate to 4.2% from 4.4% previously.
— CNBC’s Jeff Cox contributed reporting.