While the dot chart containing predictions by U.S. Federal Reserve (Fed) officials pointed to another interest rate hike by the end of the year, the chart also indicated that two interest rate cuts were forecast. interest of 25 basis points next year.

Announcing the text of the policy decision after the two-day meeting of the Federal Open Market Committee (FOMC), the Federal Reserve also shared its forecasts for the country’s economy.

The Federal Reserve maintained its forecast for the federal funds rate at 5.6 percent for the end of this year. Therefore, another increase in the official interest rate was indicated, which remained constant between 5.25 and 5.50 percent.

The Bank’s economic projections revealed that FOMC officials see the need for a 25 basis point interest rate increase at the November or December Federal Reserve meetings.

While the Federal Reserve’s forecast for the federal funds rate (median value) for 2024 was increased from 4.6 percent to 5.1 percent, it showed that officials predicted two interest rate cuts of 25 basis points in 2024, but fewer interest rate cuts than expected.

THE WIDE RANGE OF PREDICTIONS CATCHED ATTENTION

The analysts highlighted that this decrease in the planned rate cut for 2024 was one of the most significant changes at the Fed’s September meeting and stated that the new forecasts showed that “the Fed is increasingly confident that it can deliver a soft landing and that the “The economy can support higher rates for longer.”

Additionally, analysts emphasized that it appears the Federal Reserve will not soon return to the extremely low interest rates that characterized the economy in the 10 years prior to the Covid-19 outbreak.

The bank’s forecast for the federal funds rate was raised from 3.4 percent to 3.9 percent for 2025. The Federal Reserve’s 2026 interest rate forecast was 2.9 percent. The average long-term interest rate expectation remained at 2.5 percent.

In the dot chart containing the FOMC officials’ predictions, the wide range in the officials’ predictions was notable.

According to the dot plot, some officials predict the federal funds rate will end next year at 4.6 percent, while others think it will remain as high as 5.4 percent.

Forecasts suggest the federal funds rate could fall to 3.4 percent by the end of 2025 or remain at 4.9 percent.

Officials predict the interest rate may decline to 2.5 percent or reach 4.1 percent in 2026.

THERE ARE 19 ANONYMOUS PREDICTIONS ON THE CHART

On the other hand, the Fed’s Dot chart, which is updated quarterly, includes forecasts made by each FOMC member based on their own views on the economy and monetary policy. There are 19 separate unnamed projections (if the Fed is fully staffed) on the dot chart.

Federal Reserve Chair Jerome Powell had previously stressed that investors should not consider dot-plot predictions as a sound plan and that the path forward on interest rate policy can change at any time depending on incoming data. . (AA)