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 just two quarter-percentage point rate cuts in 2025, according to its medium-term forecast for interest rates, down from its previous forecast.
The so-called dot plot, which shows individual members’ expectations for interest rates, shows officials expect rates to fall to 3.9% by the end of 2025, equivalent to a target range of 3.75% to 4%. A one percentage point cut per month means a one percentage point cut.
On Wednesday, at the Fed’s final policy meeting of the year, the committee The overnight borrowing rate will be lowered to the 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 25 basis point increase, officials said there would be two more rate cuts in 2026 and one more in 2027. percentage points as the level has gradually drifted higher this year.
Here are the latest Fed goals proposed by 19 FOMC members (including voters and non-voters):
The forecast would 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%, 0.5 percentage points 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.
