The Federal Reserve voted to reduce the target range for the federal funds rate by 25 basis points, setting it at 4.25% to 4.5%. This decision, however, was not unanimous, with Cleveland Fed President Beth Hammack voting to maintain the current rates.
Updated forecasts
- GDP expectations: 2.5% for 2024 (up from 2% in September) and 2.1% for 2025.
- Unemployment: 4.2% by end of 2024 and 4.3% in 2025.
- Inflation outlook: Higher than September projections.
- Rate cuts: Only two expected in 2025, fewer than previously anticipated
The Fed maintains that risks are “roughly in balance” regarding inflation and employment goals. Forward guidance now includes consideration of “timing and extent” of future policy adjustments. Fed Chair Jerome Powell emphasized caution and flexibility in future rate decisions.
The Fed acknowledges progress towards its 2% inflation objective but notes that inflation “remains somewhat elevated.” The Personal Consumption Expenditures (PCE) price index is projected at 2.4% for 2024 and 2.5% for 2025, while the Core PCE price index outlook is 2.8% for 2024 and 2.5% for 2025.
Potential tariff impact. Powell indicated that the Fed is analyzing potential impacts of future tariffs but emphasized that it’s premature to draw conclusions without specific policy details. The Fed is preparing for various scenarios but will wait for actual policies to be implemented before determining any response.
Powell reiterated that the Fed can be “cautious” in its approach, highlighting that current rates are near a neutral level. He stressed that monetary policy is not on a set path and decisions will continue to be data driven.
Stocks plummeted in the wake of the Fed meeting conclusion and post-meeting presser from Fed Chair Powell.