The US Federal Open Market Committee (FOMC) cuts the federal funds rate range by another 25 basis points (bps) to 4.25-4.50% in the December 2024 meeting. The FOMC Dot Plot projects 50 bps of rate cuts in both 2025 and 2026.

The FOMC revises real GDP projections higher, as recent economic data have printed above expectations. The median projection for Q4 2024 is revised higher by 50 bps, from the September policy, to 2.5%, while the Q4 2025 projection is revised higher by 10 bps to 2.1%. The FOMC statement maintains that economic activity has continued to expand at a solid pace.

The FOMC also revises inflation projections upwards. Core PCE inflation is projected to be 2.5% in Q4 2025, up from 2.2% in the September policy. Core PCE is now expected to align with the 2% target by 2027. Inflation has turned out to be stickier than expected, prompting the FOMC to revise its projections.

The FOMC revises unemployment rate projections lower, as recent data do not show further easing of labour market conditions. The Q4 2024 unemployment rate is revised lower to 4.2%, from 4.4% in the September policy, while the Q4 2025 rate is revised lower to 4.3%, from 4.4%.

The FOMC Dot Plot indicates 50 bps of rate cuts in 2025, down from the 100 bps projected in the September policy. In the post-policy press conference, Fed Chair Powell stated that the Fed will be cautious with rate cuts, as the policy stance is now significantly less restrictive.

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