FOMC cuts rates, but pace of easing ahead likely will slow
Summary
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As widely expected, the FOMC cut the target range for the federal funds rate by 25 bps at today's meeting. However, one Committee member, who preferred to keep rates on hold, dissented.
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Wording in the post-meeting statement was changed to signal that further easing may proceed at a slower pace.
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The median dot for 2025 in the so-called "dot plot" was raised by 50 bps. In September, the median FOMC member looked for 100 bps of policy easing next year. The median forecast today looks for only 50 bps of rate cuts next year.
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The wide dispersion in the dot plot for next year may reflect some uncertainty regarding the policy agenda that the incoming administration may pursue. Notably, the range of core PCE inflation forecasts for 2025 widened considerably.
Fed cuts rates but forward guidance is hawkish
As widely expected by market participants, the Federal Open Market Committee (FOMC) reduced its target range for the federal funds rate by 25 bps at its policy meeting today. The FOMC has now cut its target range by 100 bps from its peak of 5.25%-5.50% through moves of 50 bps in September, 25 bps in November and 25 bps today. Although the Committee eased policy today, we would characterize the decision as a "hawkish" rate cut.
Author
Wells Fargo Research Team
Wells Fargo
