FOMC Targeted Funds Rate Range Is Unchanged; Economic Growth Expectations Shaved
by:Tom Moeller
|in:Economy in Brief
Summary
- FOMC holds funds rate target at late-December level.
- The decision was unanimously approved by FOMC voters.
- Expected GDP growth expectations reduced; price inflation raised.
At today’s meeting of the Federal Open Market Committee, the target range for the Fed funds rate was left unchanged at 4.25% to 4.50%, where it has been since the beginning of 2025, following reductions at three consecutive meetings in the fall of 2024. Rates remain below the high of 5.25% to 5.50% in place in mid-September. Today’s target range matched expectations in the Action Economics Forecast Survey.
The following statement was released after today’s meeting: “Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated.”
The statement went on to say, “The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook has diminished but remains elevated. The Committee is attentive to the risks to both sides of its dual mandate.”
The statement further indicated, “The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.”
The Fed also stated, “The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage backed securities.”
For this meeting, the Fed updated its economic expectations versus those in March. Expected real GDP growth in 2025 was reduced to 1.4% from 1.7%, in 2026 to 1.6% from 1.8% and left unchanged at 1.8% in 2027. The expected unemployment rate at end of 2025 was raised to 4.5% from 4.4%; at the end of 2026, it was raised to 4.5% from 4.3% and at the end of 2027 to 4.4% from 4.3%.
PCE Inflation expectations were raised for 2025 to 3.0% from 2.7%, in 2026 to 2.4% from 2.2% and in 2027 to 2.1% from 2.0%. Core PCE inflation forecasts also were raised for 2025 to 3.1% from 2.8%, in 2026 to 2.4% from 2.2% and for 2027 to 2.1% from 2.0%.
The projected Fed funds rate for 2025 was unchanged at 3.9%, but for 2026 it was raised to 3.6% from 3.4% and for 2027, it was raised to 3.4% from 3.1%.
The U.S. economic figures can be found in Haver’s USECON database & the interest rate data are in the WEEKLY & DAILY databases. The expectations figure is contained in the AS1REPNA database.
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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