The Federal Open Market Committee Wednesday cut the Fed Funds rate by 0.25 percentage point to a range of 4.25% to 4.5% as inflation was seen cooling, but indicated it expected fewer rate cuts next year than was expected.
FOMC members this week projected a flatter GDP, unemployment rate and PCE inflation rate going forward than was seen over the last five years. They expected a slight rise in unemployment over the next couple of years and a mild decline in PCE inflation.
In conjunction with the FOMC meeting Tuesday and Wednesday, meeting participants submitted their projections of the most likely outcomes for real Gross Domestic Product growth, the unemployment rate and Personal Consumption Expenditure inflation for each year from 2024 to 2027 and over the longer run.
The FOMC is the body that adjusts the Fed Funds interest rate and decides on other policies that will affect the economy and unemployment.
PROJECTIONS
For 2024, the median of participants’ estimates was a 2.5% growth in read GDP, up from a projected 2.0% in September but steady with 2023’s 2.5% growth. For 2025, the median estimate declined to 2.1% growth, versus a 2.0% growth rate expected at September’s meeting.
For 2026, the median expectation for real GDP growth was 2.0%, steady with September’s projection, and for 2027, the median expectation was for 1.9% GDP growth, compared with 2.0% at September’s meeting. The “longer run” expectation for GDP growth was 1.8% at both meetings.
The median unemployment rate projection for 2024 was 4.2%, down from September’s projection of 4.4%. For 2025, participants projected 4.3% unemployment, also down from September’s forecast of 4.4%.
For 2026, the median unemployment rate was 4.3%, unchanged from September. And for 2027, unemployment was projected at 4.3%, up from September’s median estimate of 4.2%. Over the longer run, unemployment was expected to run about 4.2%, the same as was projected in September.
PCE inflation this year was projected by the group at a median 2.4%, up from September’s 2.3%, and for next year was projected at 2.5%, up from September’s 2.1%. For 2026, PCE inflation was put at 2.1%, versus a projection of 2.0% in September. The 2027 projection for PCE inflation remained steady at 2.0%, as did the outlook for the longer term.
The Fed Funds rate was projected at 4.4% for this year, unchanged from the September projection, while the 2025 estimate was 3.9%, up from September’s 3.4%. For 2026, the median projection was 3.4%, compared with 2.9% in September, and the median 2027 estimate was 3.1%, versus September’s estimated 2.9%.
CATTLE, BEEF RECAP
The USDA reported formula and contract base prices for live FOB steers and heifers this week ranged from $191.52 per cwt to $194.58, compared with last week’s range of $191.08 to $193.82 per cwt. FOB dressed steers, and heifers went for $299.65 per cwt to $305.81, compared with $297.79 to $304.38.
The USDA choice cutout Wednesday was down $0.79 per cwt at $314.84 while select was off $2.95 at $285.55. The choice/select spread widened to $29.29 from $27.13 with 78 loads of fabricated product and 42 loads of trimmings and grinds sold into the spot market.
The USDA-listed weighted average wholesale price for fresh 90% lean beef was $315.99 per cwt, and 50% beef was $73.34.
The USDA said basis bids for corn from feeders in the Southern Plains were unchanged at $1.19 to $1.35 a bushel over the Mar corn contract, which settled at $4.37 1/4, down $0.06 1/4.
No delivery intentions were posted for the Dec live cattle contract Wednesday.
The CME Feeder Cattle Index for the seven days ended Tuesday was $263.00 per cwt, up $0.46. This compares with Wednesday’s Jan contract settlement of $257.00, down $0.47.