According to the Fed's dot plot in March 2024, the expectation at the time was that there might be three rate cuts in 2024, each of about 25 basis points. But by June, the situation had changed. Fed officials updated their forecasts at the June meeting, and the dot plot showed that most officials believed that there might be only one rate cut in 2024, and some even believed that there might be no rate cut at all.
Specifically, the Fed currently expects the federal funds rate to be 5.1% at the end of 2024, which is an increase from previous forecasts. In addition, the Fed's GDP growth forecast for 2024 was raised to 2.1%, while the unemployment rate forecast was lowered to 4.0%. In terms of inflation, the core PCE inflation forecast for 2024 was raised to 2.6%.
These adjustments reflect the Fed's optimism about the economic outlook, and also show that they have increased confidence that inflation will fall back to the 2% target. But even so, Fed Chairman Powell emphasized after the meeting that despite some positive signs in recent inflation data, the Fed will still determine the direction of monetary policy based on future economic data.
Therefore, although the market generally expects that the Federal Reserve may start to cut interest rates in the second half of 2024, this expectation is still uncertain, and the final decision will depend on future economic data, especially the performance of inflation and the job market.
