Federal Reserve Open Market Committee Economic Projections | Dec. 2024

Summary of Economic Projections

In conjunction with the Federal Open Market Committee (FOMC) meeting held on December 17–18, 2024, meeting participants submitted their projections of the most likely outcomes for real gross domestic product (GDP) growth, the unemployment rate, and inflation for each year from 2024 to 2027 and over the longer run. Each participant’s projections were based on information available at the time of the meeting, together with her or his assessment of appropriate monetary policy—including a path for the federal funds rate and its longer-run value—and assumptions about other factors likely to affect economic outcomes. The longer-run projections represent each participant’s assessment of the value to which each variable would be expected to converge, over time, under appropriate monetary policy and without further shocks to the economy. “Appropriate monetary policy” is defined as the future path of policy that each participant deems most likely to foster outcomes for economic activity and inflation that best satisfy his or her individual interpretation of the statutory mandate to promote maximum employment and price stability.

What we had in Dot Plots

The Federal Reserve cut interest rates by 25 basis points on Wednesday, bringing the benchmark rate to a range of 4.25% to 4.5%. This marks the third rate cut of the year but signals a shift toward a slower pace of cuts, with Fed officials now projecting just two rate cuts in 2025, down from four previously anticipated. The Fed also raised its long-term interest rate outlook to 3%, reflecting expectations of a higher neutral rate.

Fed Chair Jerome Powell highlighted stronger-than-expected economic growth in the second half of 2024, reduced risks to the labor market, and lingering uncertainty around inflation as key factors behind the cautious approach. Inflation is now projected to reach the 2% target by 2027, later than previously forecast, with core PCE inflation expected at 2.5% in 2025 and 2.2% in 2026.

The Fed’s economic outlook includes a stronger labor market, with unemployment now forecast to rise modestly to 4.3% in 2025, lower than earlier estimates. GDP growth expectations were also revised higher to 2.1% for 2025, reflecting ongoing resilience in the economy. Additionally, preliminary considerations of inflationary fiscal policies under the incoming Trump administration have begun influencing some Fed forecasts.

In summary, the Fed is taking a more cautious approach to rate cuts, balancing stronger economic growth and labor market stability with persistent inflationary pressures.

Tables

The next tables are Economic projections of Federal Reserve Board members and Federal Reserve Bank presidents, under their individual assumptions of projected appropriate monetary policy, December 2024 in three Categories of Median, Central Tendency, and Range of Ideas. 

Economic projections of Federal Reserve Board members and Federal Reserve Bank presidents, under their individual assumptions of projected appropriate monetary policy, December 2024 - Percent | Median

Note: Projections of change in real gross domestic product (GDP) and projections for both measures of inflation are percent changes from the fourth quarter of the previous year to the fourth quarter of the year indicated. PCE inflation and core PCE inflation are the percentage rates of change in, respectively, the price index for personal consumption expenditures (PCE) and the price index for PCE excluding food and energy. Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated. Each participant’s projections are based on his or her assessment of appropriate monetary policy. Longer-run projections represent each participant’s assessment of the rate to which each variable would be expected to converge under appropriate monetary policy and in the absence of further shocks to the economy. The projections for the federal funds rate are the value of the midpoint of the projected appropriate target range for the federal funds rate or the projected appropriate target level for the federal funds rate at the end of the specified calendar year or over the longer run. The September projections were made in conjunction with the meeting of the Federal Open Market Committee on September 17