US | Fed’s dot plot signals fewer rate cuts in 2024

Summary

It still points to one more 25bp rate hike this year as the Fed is still not fully confident about inflation and feels it needs to strengthen market’s expectations about the need for “higher for longer” rates.

Key points

• Key points:
• The FOMC voted unanimously to keep the fed funds rate steady at a 22-year-high 5.25-5.50% target range.
• Chair Powell’s reason for delivering a more hawkish than expected message “is more about economic growth.”
• GDP growth for 4Q23 was revised up from 1.0 to 2.1% and the unemployment rate is now projected to peak at 4.1%.
• Core PCE inflation was revised only slightly lower to 3.7% for 2023; it is forecasted to fully converge to the 2.0% target until 2026.
• The data-dependent approach needs more time: risks are biased to higher rates, but a rate cut cycle in 2024 is still more likely than not.

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