Fed raises GDP projections for 2024 but still sees three rate cuts in coming year

The Federal Reserve voting members still expect three interest rate cuts in 2024 despite improved economic growth. The March projections from the Federal Open Market Committee show a median Federal funds rate of 4.6% in 2024, implying three cuts of 0.25 percentage points. This is unchanged from the previous projection in December. However, the projected change in real GDP for 2024 increased to 2.1% from 1.4% in December. Core PCE inflation projections also rose to 2.6% from 2.4%. There were some slight changes within the projections, with fewer splits among individual members. The median projection for the Fed funds rate in 2025 increased to 3.9% from 3.6%, suggesting one fewer cut. These updated projections come after a series of inflation reports that have raised concerns about price increases. Traders’ expectations for rate cuts have been lowered according to the CME FedWatch tool.