Fed signals 3 interest rate cuts. In the last meeting of the year, the US Federal Reserve (Fed) kept the policy rate unchanged, at the highest level in 22 years, in line with expectations. Thus, the bank did not change the interest rate for 3 consecutive meetings.
The Fed predicted a 75 basis point interest rate cut in 2024. Fed Chairman Jerome Powell stated that the possibility of an additional interest rate increase is not completely off the table, and that the timing of the interest rate cut is being discussed.
At its December meeting, the Fed kept the policy rate unchanged at 5.25-5.50%. The decision was taken unanimously. The expectation was that interest rates would not change. The bank predicted 3 interest rate cuts for next year.
The Fed revised its growth forecast upwards for this year and downwards for next year. The 2023 forecast was revised from 2.1% to 2.6%, and for 2024 from 1.5% to 1.4%. While the 2025 growth forecast remained unchanged at 1.8%, the 2026 forecast was increased from 1.8% to 1.9%.
3 interest rate cuts are predicted in 2024
The Fed predicted 3 interest rate cuts in 2024 in dot plots known as dot plots. Fed officials also predicted interest rate cuts in 2025 and 2026.
The 2023 inflation expectation was reduced from 3.3% to 2.8%, and the 2024 expectation was reduced from 2.5% to 2.4%. Core inflation expectation was reduced to 3.2% for this year and 2024 expectation to 2.4%.
Estimates for the unemployment rate were kept at 3.8% for this year, 4.1% for next year and 4.1% for 2025. The unemployment rate forecast for 2026 was increased from 4% to 4.1%.
“Inflation slowed down but remained high”
In the statement, it was stated that the latest indicators indicate that the strong pace of growth in economic activity slowed down in the third quarter.
It was stated in the statement that employment gains have slowed down since the beginning of the year but continue to remain strong, and the unemployment rate continues to remain low. In the statement, it was stated that inflation slowed down throughout the year but remained high.
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