Fed sees faster GDP growth in 2024, shallower path for rate decreases in later years

(Sharecast News) - The U.S. central bank kept interest rates unchanged but nudged its forecasts for economic growth and interest rates in 2025 and 2026 a tad higher. "The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent," the Federal Open Market Committee said in its statement.

According to the Summary of Economic Projections, top officials at the Fed now saw U.S. gross domestic product expanding at a pace of 2.1% over the course of 2024.

That was faster than the 1.4% clip anticipated at the end of 2023.

Inflation as measured by the core price deflator for personal consumption expenditures was also expected to fall back to the 2.0% target more slowly and to only 2.6% during the current year.

The December SEP projection for core PCE prices had been 2.4%.

The median projection for the Fed funds rate at the end of 2024 was unchanged at 4.6% but it was now seen at 3.9% at the end of 2025 and 3.1% at the end of 2026.

In December, officials had seen the Fed funds rate declining to 3.6% and 2.9% in 2025 and 2026, respectively.