Federal Reserve System (FED) FOMC Meeting summary

Economic outlook and policy stance

• Economic activity continues to expand, with GDP rising 2.3% in Q4 and projected to grow 1.7% in 2024, with longer-run growth estimates at 1.8%.

• Labor market remains solid, with unemployment at 4.1% and job gains averaging 200,000 per month; projections show unemployment at 4.4% in 2025 and 4.2% in the longer run.

• Inflation has eased but remains above the 2% target; PCE inflation is projected at 2.7% for 2024, 2.2% for 2025, and 2% by 2027.

• The FOMC kept the federal funds rate unchanged at 4.25–4.5% and signaled no rush to adjust policy amid high uncertainty.

• Median projections for the federal funds rate are 3.9% at end-2024, 3.4% at end-2025, and 3.1% for 2027 and the longer run.

Inflation dynamics and tariffs

• Recent inflation uptick is partly attributed to new tariffs, with goods inflation rising unexpectedly in early 2024.

• Distinguishing tariff-driven from non-tariff inflation is challenging; some inflation is expected to be transitory if expectations remain anchored.

• Short-term inflation expectations have increased, mainly due to tariffs, but longer-term expectations remain well anchored.

• The FOMC's base case assumes tariff-related inflation will not persist, but uncertainty is high.

• Projections include assumptions of full retaliation on tariffs, with effects baked into forecasts.

Labor market and employment trends

• Labor market is balanced, with low hiring and firing rates; job creation remains healthy.

• Most job growth has been in government and adjacent sectors, but private sector growth is still considered healthy.

• Participation rates are high, and wage growth is consistent with 2% inflation, assuming continued productivity.