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January 31, 2024US MONETARY POLICY At its scheduled Federal Open Market Committee (FOMC) meeting, the Federal Reserve announced that it will maintain the target range for the federal funds rate 5.25% to 5.50%. Reductions in the target range were not considered appropriate at this time as the Committee has yet to see sustained movements towards the 2% inflation target. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in the Plans for Reducing the Size of the Federal Reserve's Balance Sheet that were issued in May 2022.
Recent indicators are indicative of strong US economic growth and employment gains which have moderated through 2023. Inflation remains elevated but pressures have subsided over the last 12 months. The United States Consumer Price Index (not seasonally adjusted) for All Urban Consumers increased 3.4% in December, up from 3.1% year-over-year in November 2023. Economic activity in the United States has slowed from its third quarter pace reflecting tighter financial and credit conditions. The advance estimate for Q4 2024 has real US GDP at 3.3% (seasonally adjusted annualized rate), the sixth consecutive quarter of growth at an annualized pace of 2.0% or higher. Job growth has moderated since earlier in the year but remains strong, with December 2023 gains outpacing November and October. The unemployment rate was stable at 3.7% in December. There has been a gradual rise in the US unemployment rate since the beginning of 2023.
In their December 2023 projections, the Federal Reserve expected US economic activity to increase 2.6% in 2023, 1.4% in 2024 and 1.8% in 2025. Compared to the September projections, this represents an upgrade for 2023 and a downgrade for 2024, and no change for 2025. Inflation is expected to average 3.2% this year before declining to 2.4% in 2024 and 2.2% in 2025. Inflation projections (core personal consumer expenditures) are also slightly downgraded for the 2023, 2024, and 2025 from the September projections. Unemployment rate is projected to be at 3.8% in 2024, 4.1% in 2025, and 4.1% in 2025. Projections for unemployment remained unchanged from the September forecast.
The Committee will continue to monitor economic developments and is prepared to adjust the monetary policy measures as appropriate, taking into account information on labor market conditions, inflation pressures and inflation expectations, and financial and international developments. The next scheduled FOMC meeting will be held on March 19-20, 2024.
Source: US Federal Reserve, FOMC Statement, Summary of Economic Projections (December 13, 2023)
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