The US Federal Open Market Committee (FOMC) cut the federal funds rate range by 50 basis points to 4.75-5.00% at its September 2024 meeting. The FOMC Dot Plot projects 50 basis points of additional rate cuts in 2024 and 100 basis points of cuts in 2025.

The FOMC revised real GDP projection for Q4 2024 marginally lower to 2.0% from 2.1% in the June policy. The median projection for Q4 2025 remains at 2%. The FOMC statement mentions that economic activity continues to expand at a solid pace.

The FOMC also revised inflation projections downwards. Core PCE inflation is now projected to be 2.2% for Q4 2025, down from 2.3% in June, while headline PCE is projected to be 2.1%, revised from 2.3% for the same period. Participants expect that inflation will align with the 2% target by 2026.

Inflation continues to slowly descend towards the 2% target, with recent inflation readings mostly below market expectations. The FOMC statement also recognises progress towards the 2% inflation objective but notes that inflation remains ‘somewhat elevated.’

The FOMC revised unemployment rate projections higher. Labour market conditions have eased, as reflected in the decline in job gains, job openings, and the quits rate. The FOMC statement also highlights that job gains have slowed, and the unemployment rate has increased, although it remains low.

The FOMC Dot Plot suggests 150 basis points of additional rate cuts by the end of 2025. However, Fed Chair Powell emphasised that the recent 50 basis point rate cut should not be seen as setting a new pace.

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