Fed sees faster GDP growth in 2024, shallower path for rate decreases in later years

The U.S. central bank kept interest rates unchanged but nudged its forecasts for economic growth and interest rates in 2025 and 2026 a tad higher.

"The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent," the Federal Open Market Committee said in its statement.

According to the Summary of Economic Projections, top officials at the Fed now saw U.S. gross domestic product expanding at a pace of 2.1% over the course of 2024.

That was faster than the 1.4% clip anticipated at the end of 2023.

Inflation as measured by the core price deflator for personal consumption expenditures was also expected to fall back to the 2.0% target more slowly and to only 2.6% during the current year.

The December SEP projection for core PCE prices had been 2.4%.

The median projection for the Fed funds rate at the end of 2024 was unchanged at 4.6% but it was now seen at 3.9% at the end of 2025 and 3.1% at the end of 2026.

In December, officials had seen the Fed funds rate declining to 3.6% and 2.9% in 2025 and 2026, respectively.