Federal Reserve System (FED) FOMC Meeting summary

Economic outlook and recent developments

• Economic activity continues to expand at a solid pace, with GDP rising 2.8% in Q3 and consumer spending resilient, while labor market conditions are easing but unemployment remains low.

• Inflation has eased significantly, with total PCE prices up 2.5% over 12 months and core PCE at 2.8%, moving closer to the 2% target but still somewhat elevated.

• Supply improvements have supported economic strength, though housing sector activity remains weak.

Monetary policy actions and guidance

• The federal funds rate was lowered by 25 basis points to 4.25%-4.5%, totaling a 100 basis point reduction from its peak.

• Interest rate paid on reserve balances reduced to 4.4%, and primary credit rate decreased to 4.5%, both effective December 19, 2024.

• Committee will continue reducing holdings of Treasury securities and agency debt and MBS.

• Policy stance is now less restrictive, allowing for a more cautious approach to future adjustments.

• The Committee will assess incoming data and risks, with no preset course for further rate changes.

Inflation and labor market outlook

• Inflation is projected at 2.4% for 2024 and 2.5% for 2025, with a return to the 2% target thereafter.

• Labor market is expected to remain solid, with unemployment projected at 4.2% for 2024 and 4.3% in subsequent years.

• Wage growth has eased, and the jobs-to-workers gap has narrowed, indicating less labor market tightness.

• Further cooling in the labor market is not seen as necessary to achieve the inflation target.