09/18/2024 – 16:07
Among the 19 Federal Reserve (Fed, the US central bank) directors present at the Federal Open Market Committee (FOMC) meeting this Wednesday, the 18th, nine believe that interest rates will end this year between 4.5% and 4.25%, a range 50 basis points (bp) lower than the current one, after today’s cut. Another seven directors believe that the rate will end 2024 between 4.75% and 4.5%, while two central bankers argue that interest rates should end this year at the current level, between 4.75% and 5%. The median projections for the Fed Funds rate, as the US interest rate is known, fell from 5.1% in June to 4.4% this Wednesday.
For next year, the dot plot indicates an even more mixed scenario. Most assessments are in the range between 3% and 3.5%: six directors expect interest rates to end 2025 between 3.0% and 3.25%, and another six suggested that the rate will end next year between 3.25% and 3.50%. Three of them expect interest rates between 3.50% and 3.75%, one between 3.75% and 4%, and another between 4% and 4.25%. On the other end, two directors expect interest rates between 2.75% and 3%. For the end of 2025, the median of projections is for interest rates at 3.4%.
In 2026, estimates are concentrated in the range between 2.75% and 3% – six policymakers project this scenario. Another four see an even lower interest rate, in the range of 2.25% to 2.75%, while another five central bankers expect the fed funds rate to be between 3% and 3.5% at the end of 2026. Four policymakers expect the rate to be between 3.5% and 4%. The median expectation for 2026 fell from 3.1% in June to 2.9% today.
This decision was the first to also bring the views for 2027: the projections are practically the same as those for 2026, with the difference in the range of 2.25% to 2.50% (with 2 directors) and in the range of 2.75% to 3% (with four directors). In the long term, the median of expectations is for interest rates to remain at 2.9%; the same as in 2027.
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