Fed expects 75 bps interest rate cut in 2024

The Federal Reserve's policymakers decided in the meeting held on Dec. 12-13, 2023, to keep the target for the federal-funds rate steady at 5.25% to 5.50%, amid expectations that about three quarter-point cuts were on the table for 2024.

Policymakers revised down their forecasts for interest rates to end 2024 at 4.6%, 50 bps lower than September’s 5.1%.

The projections showed that Fed officials see gross domestic product (GDP) growth falling to 1.4% from 1.5% in September. They also expected inflation to ease with the Personal Consumption Expenditures Index (PCE) slowing to 2.4% by the end of the year, from 2.5% previously.

The Fed officials suggested interest rates have likely peaked, according to details of their December policy meeting. But they remained uncertain as to how long rates should remain at current levels to ensure that inflation returns to the central bank's preferred target.

Forecasts for unemployment remained unchanged at 4.1% this year.

Policymakers also affirmed that they aim to achieve maximum employment at an inflation rate of 2% in the long term.