Trends & Tides – US FOMC March 2024

During the March 2024 meeting, the US Federal Open Market Committee (FOMC) decided to hold the Federal Funds Rate steady in the 5.25-5.50% target range and maintained the outlook for three 25 bps rate cuts in 2024.

The FOMC revised the real GDP projection for 2024 (year-end) upward to 2.1% in Mar’24 from 1.4% in the Dec’23 meeting. The GDP projections for 2025 and 2026 (year-end) were also revised higher to 2.0%. US economic growth continues to be resilient. The Atlanta Fed Nowcast suggests Q1CY24 GDP growth at a healthy 2.1% SAAR.

The FOMC revised the unemployment rate marginally downward to 4% in 2024. The US labour market is exhibiting signs of easing, as reflected in the increase in the unemployment rate to 3.9% in Feb’24. However, job gains and wage growth remain elevated.

The FOMC revised its inflation projections upward. Core PCE inflation was revised to 2.6% in Mar’24 from 2.4% in Dec’23 for 2024 (year-end), and headline PCE was revised to 2.2% from 2.1% for 2025 (year-end). Participants expect inflation to align with the 2% target by 2026. The descent of CPI inflation has slowed in the US, and recent prints have been higher than market expectations.

The FOMC Dot Plot suggests three 25 bps rate cuts by end-2024 and an additional three 25 bps rate cuts by end-2025. In the post-policy conference, Fed Chair Powell indicated the possibility of slowing the pace of quantitative tightening in the near future.

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