by Calculated Risk on 4/28/2024 08:21:00 AM

Most analysts expect there will be no change to the federal funds rate at the meeting this week keeping the target range at 5‑1/4 to 5-1/2 percent.  Fed Chair Powell is expected to maintain a slightly hawkish stance during the press conference, since the recent inflation reports were above expectations.

Currently market participants expect the next Fed move to be a 25 bp cut announced at the September FOMC meeting.  The market is almost pricing in a 2nd cut in December. 

 
From BofA:

The Fed is less confident about how quickly inflation will slow, but it has not given up on its expectation that it will. We expect the Fed to say it is prepared to keep policy rates where they are for as long as needed to bring inflation down. We also look for the Fed to announce the tapering of balance sheet runoff by cutting the maximum runoff cap on Treasuries in half.

Projections will NOT be released at this meeting. For review, here are the March projections. Since the last projections were released, growth has been slightly slower, and inflation slightly higher than expected.

The BEA's advance report for Q1 GDP showed real growth at 1.6% annualized.  Early estimates for Q2 GDP are around 3% annualized, and the FOMC projections for year-over-year growth in Q4 2024 are close.

GDP projections of Federal Reserve Governors and Reserve Bank presidents, Change in Real GDP1
Projection Date	2024	2025	2026
Mar 2024	2.0 to 2.4	1.9 to 2.3	1.8 to 2.1
Dec 2023	1.2 to 1.7	1.5 to 2.0	1.8 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 3.8% in March, just below the FOMC projections for Q4.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents, Unemployment Rate2
Projection Date	2024	2025	2026
Mar 2024	3.9 to 4.1	3.9 to 4.2	3.9 to 4.3
Dec 2023	4.0 to 4.2	4.0 to 4.2	3.9 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 March 2024, PCE inflation increased 2.7 percent year-over-year (YoY).  This is at the high end of the FOMC projections for Q4.

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

PCE core inflation increased 2.8 percent YoY in March.  This is also at the high end of the FOMC projections for Q4 2024.

Over the last 6 months, the PCE Price Index increase 2.5% annualized, the core PCE price index increased at a 3.0% annual rate.   However, core PCE minus Housing increased at a 2.4% annualized rate suggesting that 2024 projections are a little high.

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