Important decision of the US Federal Reserve for interest rates
According to the online economy report, quoted by Tabnak; The Federal Reserve kept its key interest rate steady for the third time in a row and released a schedule of multiple cuts in 2024 and beyond.
The Federal Reserve also projected that the core personal consumption expenditure price index will decline to 2.2 percent by 2025 and eventually reach its 2 percent target in 2026. This index increased by 3.5% in October compared to the same period last year.
These new forecasts paint a softer picture of inflation over the next two years than the last update in September. Earlier, the Federal Reserve predicted that the core personal consumption expenditure price index would reach 2.6% in 2024 and 2.3% in 2025.
The Federal Open Market Committee said in a statement after Wednesday’s meeting that inflation has eased over the past year, while prices have remained high.
While people closely monitor the CPI as a measure of inflation, the Federal Reserve prefers the core reading of the core personal consumption expenditure price index. The former is primarily concerned with the prices of goods and services, while the latter focuses on what people actually spend and adjusts based on consumer behavior when prices fluctuate.
The core consumer price was 4% in November, while the headline consumer price was 3.1%.
The committee members also upgraded their forecast for GDP. They now expect US gross domestic product to grow at an annual rate of 2.6 percent this year, up half a percentage point from the last update in September.
Federal Reserve officials have pegged gross domestic product for next year at 1.4 percent, roughly unchanged from their previous outlook. Forecasts for the unemployment rate also remained largely unchanged. It reached 3.8% in 2023 and increased to 4.1% in the following years.
Forecasts released by the Federal Reserve showed that the central bank will cut interest rates to 4.6 percent by the end of 2024, which would be three-quarters of a point lower than the current target range of 5.25 to 5.5 percent. Also, 4 cuts It will come in 2025. Three more cuts in 2026 will bring the federal funds rate down to 2-2.25%.