- Prior was 4.50-4.75%
- The market was 97% priced in for a 25 bps cut
- Fed adds a phrase about considering the ‘extent and timing’ of adjustments to rates
- Hammack dissents in favor of holding, no other dissents
- Pricing was for 48.3 bps of cuts in 2025, now at 39 bps
- USD/JPY was trading at 153.77 ahead of the release and up to 154.40 afterwards
The statement is nearly unchanged. The lone change was adding the words ‘the extent and timing’ in this line:
In considering the extent and timing of additional adjustments to the
target range for the federal funds rate, the Committee will carefully
assess incoming data, the evolving outlook, and the balance of risks.
Fed Funds Rate Median:
- 2024: 4.4% → No change from September
- 2025: 3.9% → Up from 3.4%
- 2026: 3.4% → Up from 2.9%
- 2027: 3.1% → Up from 2.9%
- Longer run: 3.0% → Up from 2.9%
Goldman Sachs forecast the median dot to show 3 cuts in 2025 to 3.625%, 2 further cuts in 2026 to 3.125%, and a flat path in 2027 at 3.125%. So these 2025 and 2026 dots were more hawkish than forecast and that’s why the US dollar is broadly higher.
GDP Growth Median:
- 2024: 2.5% → Up from 2.0%
- 2025: 2.1% → Up from 2.0%
- 2026: 2.0% → No change
- 2027: 1.9% → Down from 2.0%
Unemployment Rate Median:
- 2024: 4.2% → Down from 4.4%
- 2025: 4.3% → Up from 4.2%
- 2026: 4.3% → Up from 4.1%
- 2027: 4.3% → Up from 4.2%
- Longer run: 4.2% → No change
The higher 2025 unemployment rate is also notable as it sets a higher bar for easing in order to meet the forecast. Said differently, the Fed would probably have to see unemployment rise to 4.5% to cut further.