- Previously 4.50-4.75%
- 97% of the market was priced in for a 25 bps cut
- The Fed adds a phrase about considering the 'scope and timing' of rate changes
- Hammack agrees to hold, with no further dissent
- The price was for 48.3 bps of cuts in 2025, now at 39 bps
- USD/JPY was trading at 153.77 ahead of the release and up to 154.40 afterwards
The statement is almost unchanged. The only change was to add the words 'the rate and the time' in this line:
In consideration the rate and duration Regarding changes other than the target range for the federal funding level, the Committee will carefully evaluate incoming data, the evolving outlook, and the balance of risks.
Average Rate of Deer Fund:
- 2024: 4.4% → No change from September
- 2025: 3.9% → Up from 3.4%
- 2026: 3.4% → Up from 2.9%
- 2027: 3.1% → Up from 2.9%
- Run further: 3.0% → Up from 2.9%
Goldman Sachs forecasts that the middle dot would show 3 cuts in 2025 to 3.625%, 2 more cuts in 2026 to 3.125%, and a flat path in 2027 at 3.125%. So those 2025 and 2026 dots were more hawkish than expected and that's why the US dollar is relatively higher.
Average GDP Growth:
- 2024: 2.5% → Up from 2.0%
- 2025: 2.1% → Up from 2.0%
- 2026: 2.0% → No change
- 2027: 1.9% → Down from 2.0%
Average unemployment rate:
- 2024: 4.2% → Down from 4.4%
- 2025: 4.3% → Up from 4.2%
- 2026: 4.3% → Up from 4.1%
- 2027: 4.3% → Up from 4.2%
- Run further: 4.2% → No change
The higher unemployment rate in 2025 is also notable because it sets a higher bar for mitigation to meet the forecast. Said differently, the Fed would probably have to increase unemployment to 4.5% to cut further.
