Trends & Tides – US FOMC June 2024

The US Federal Open Market Committee (FOMC) held the Federal Funds Rate steady in the 5.25-5.50% target range at the June 2024 meeting. However, the FOMC dot plot revised rate cut projections for 2024 downward to one rate cut from three rate cuts in the March FOMC.

The FOMC kept the real GDP projections unchanged in the June policy as US economic growth remains resilient. The forecasters have consistently revised US real GDP growth forecasts for 2024 upward to 2.4% YoY from 1.3% YoY at the beginning of the year. The FOMC statement also maintains that economic activity has continued to expand at a solid pace.

The FOMC revised inflation projections upward. Core PCE inflation was revised to 2.8% in June from 2.6% in March for Q4 2024, and headline PCE was revised to 2.6% from 2.4% for Q4 2024. Participants expect inflation to align with the 2% target gradually by 2026. The descent of inflation has slowed, and recent inflation readings have mostly exceeded market expectations. The FOMC statement recognizes the modest further progress towards the 2% inflation objective.

In the June meeting, the FOMC revised the unemployment rate projections higher for 2025 and 2026. The US labour market conditions are easing, as reflected in the decline in job openings and the quits rate, but job gains remain high. The FOMC statement also maintains that job gains have remained strong, and the unemployment rate has stayed low.

The FOMC Dot Plot now suggests only one 25-bps rate cut by the end of 2024 and four rate cuts (100-bps) in 2025. However, in the post-policy conference, Fed Chair Powell emphasized that the new forecasts represent a conservative approach.

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