by William J. Luther
The American Institute for Economic Research
As anticipated, the Federal Open Market Committee (FOMC) voted to hold its federal funds rate target in the 5.25 to 5.5 percent range on Tuesday. FOMC members also revised their forward guidance for the future path of interest rates. Back in March, the median FOMC member projected the midpoint of the federal funds rate target range would fall to 4.6 percent this year, equivalent to three 25-basis-point cuts. Now, the median FOMC member projects it will fall to just 5.1 percent, equivalent to just one 25-basis-point cut.
The FOMC’s plan to hold rates higher for longer is not limited to 2024. The median FOMC member now projects the federal funds rate will be 4.1 percent in 2025, compared with the earlier projection of 3.9 percent. The median FOMC member also revised up the longer run federal funds rate projection, from 2.6 percent to 2.8 percent.