Fed Interest Rate Cuts Projections

(Reuters) – U.S. central bankers project more limited interest rate cuts in 2025 than the full percentage point of reductions delivered in 2024, citing slower progress toward their 2% inflation goal, a strong labor market, and uncertainties surrounding potential policy impacts during Donald Trump’s second term as President.

Policy Leanings Overview

Comments from Fed policymakers since the last rate-setting decision are categorized as “dove” or “hawk” according to their monetary policy leanings:

• Doves: Focus on labor market risks, advocating for quicker rate cuts.
• Hawks: Concerned about inflation threats, cautious about rate cuts.

Comments Summary

• Doves:

  • Lisa Cook (Jan. 6, 2025): Advocates for caution in further cuts.
  • Austan Goolsbee (Jan. 10, 2025): Questions evidence of economic overheating.
  • Michael Barr: No recent policy comments.
  • Adriana Kugler (Jan. 4, 2025): Notes current economic conditions are not ideal.
  • Patrick Harker (Jan. 9, 2025): Suggests a pause to assess the economic situation.

• Hawks:

  • Jerome Powell (Jan. 8, 2025): Shares a cautious stance on future cuts.
  • John Williams (Jan. 9, 2025): Expects gradual adjustments based on sustained data changes.
  • Neel Kashkari: No recent comments.
  • Raphael Bostic: No recent comments.

Fed Rate Reductions

The Federal Open Market Committee (FOMC) reduced the policy rate in December to the 4.25%-4.50% range. Most policymakers project cuts to a range of 3.75%-4.00% by the end of this year, reflecting a more modest reduction than expected in September.

Voting Structure

Seven Fed governors have permanent votes at FOMC meetings, held eight times a year. All regional Fed presidents discuss monetary policy but only five cast votes on a rotating basis.

Recent Policymaker Designation Changes

Reuters tracked shifting designations among the policymakers based on new comments and economic developments in each categorization leading to recent FOMC meetings:
– Current Designations:
– Dec. ’24: 0 Doves, 2 Dovish, 10 Centrists, 7 Hawks
– Nov. ’24: 0 Doves, 0 Dovish, 13 Centrists, 5 Hawks
– Sept ’24: 0 Doves, 1 Dovish, 12 Centrists, 5 Hawks
– Earlier counts vary, reflecting shifts in economic outlook and policy sentiments.