by Calculated Risk on 3/17/2024 10:22:00 AM

Most analysts expect there will be no change to FOMC policy at the meeting this week, keeping the target range for the federal funds rate at 5‑1/4 to 5-1/2 percent.  Some analysts expect Fed Chair Powell to take a slightly hawkish stance during the press conference, since the last two CPI reports were above expectations.

Currently market participants expect the next Fed move to be a 25 bp cut announced at the June FOMC meeting.  The market is pricing in a 2nd cut in September - and a total of 3 cuts in 2024.  

Projections will be released at this meeting. For review, here are the December projections.  Since the last projections were released, the economy has performed close to FOMC expectations.

Early estimates for Q1 GDP are around 2% annualized, and it seems likely the FOMC will revise up the GDP projections for 2024.

GDP projections of Federal Reserve Governors and Reserve Bank presidents, Change in Real GDP1
Projection Date	2024	2025	2026
Dec 2023	1.2 to 1.7	1.5 to 2.0	1.8 to 2.0
Sept 2023	1.2 to 1.8	1.6 to 2.0	1.7 to 2.0

¹ Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was at 3.9% in February and will likely be unrevised. 

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents, Unemployment Rate2
Projection Date	2024	2025	2026
Dec 2023	4.0 to 4.2	4.0 to 4.2	3.9 to 4.3
Sept 2023	3.9 to 4.4	3.9 to 4.3	3.8 to 4.3

² Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of January 2024, PCE inflation increased 2.4 percent year-over-year (YoY).  The projections for PCE inflation will likely not be revised.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents, PCE Inflation1
Projection Date	2024	2025	2026
Dec 2023	2.2 to 2.5	2.0 to 2.2	2.0
Sept 2023	2.3 to 2.7	2.0 to 2.3	2.0 to 2.2

PCE core inflation increased 2.8 percent YoY in January.  This will likely be unrevised.  

Over the last 6 months, the PCE Price Index increase 2.5% annualized, the core PCE price index increased at a 2.5% annual rate.   However, core PCE minus Housing increased at a 1.8% annualized rate suggesting that 2024 projections are too high.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents, Core Inflation1
Projection Date	2024	2025	2026
Dec 2023	2.4 to 2.7	2.0 to 2.2	2.0 to 2.1
Sept 2023	2.5 to 2.8	2.0 to 2.4	2.0 to 2.3