Today is the FOMC announcement day. As expected, the Fed kept the rates unchanged at 5.25% - 5.5%. The statement looked almost exactly the same as the November one except for the changes highlighted above. The Fed is saying the economic growth is slowing down and inflation is also trending down but remains elevated. In other words, they are expecting a soft landing with abating price pressure. I don’t think there’s anything unexpected from the statement.
For the December meeting, the FOMC also published the economic projections from individual members and the “dotplots”. The dotplots for the fed fund rate projection is shown below. Fifteen FOMC members expect the Fed will cut rates by 50 to 100 basis points next year while three members think the rate will remain 5% or above and only one member thinks the rate will be below 4%. For 2024, the rate range went from 4.6-5.4% in the September projection to 4.4-4.9% in the December projection. In other words, the Fed predicts that they will start cutting rates in 2024. They didn’t say how low the rate will go though. But it’s definitely not going back to zero.