Perspectives

  • The Fed Report: December 2024

    • Consistent with market expectations, the FOMC lowered the target range for the federal funds rate by 25 basis points to 4.25-4.50% at its final meeting of 2024, completing the initial recalibration phase of monetary policy.
    • Although the Fed lowered its policy rate as expected, it also communicated a hawkish message and more cautious approach with respect to future policy actions, consistent with the Fed’s revised forecast that economic growth is anticipated to be stronger than previously expected and that it will take longer to achieve the Fed’s 2% inflation objective.
    • The Fed’s December Summary of Economic Projections (SEP) median rate forecast indicated a slower pace of cuts, with 50 basis points of rate reductions in both 2025 and 2026 and a long run federal funds rate of 3.0%.
    • The Fed also implemented a technical adjustment to the rate on the overnight reverse repurchase agreement (RRP) facility, bringing it in-line with the revised federal funds rate lower bound (4.25%); previously, the RRP rate was five basis points higher than the lower bound of the federal funds rate (4.55%).
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