Fed Indicates Three Rate Cuts in 2024

The Federal Reserve kept the fed funds rate steady at 5.25%-5.5% for a third consecutive meeting in December 2023, in line with expectations but indicated 75bps cuts in 2024. Policymakers said that recent indicators suggest that economic growth has slowed and job gains have moderated but remain strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated. The central bank also published new projections. GDP growth is expected higher this year (2.6% vs 2.1% in the September projection), but slightly lower in 2024 (1.4% vs 1.5%). Also, PCE inflation was revised lower for both 2023 (2.8% vs 3.3%) and 2024 (2.4% vs 2.5%) as well as core PCE inflation which is seen at 3.2% in 2023 (vs 3.7%) and 2.4% (vs 2.6%) next year. Unemployment projections remained steady at 3.8% for 2023 and 4.1% for next year. The so-called dot plot showed the median year-end 2024 projection for the federal funds rate fell to 4.6% from 5.1% seen in September.


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