Latest news with #economicForecasts
Yahoo
10 hours ago
- Business
- Yahoo
Fed dot plot reveals more divided central bank, but still points to two rate cuts in 2025
The Federal Reserve's latest "dot plot" outlining future interest rate moves suggests the central bank will still cut rates twice this year, unchanged from its March outlook, though June's forecasts shows a more divided Fed weighing its next move on interest rates. The Fed announced Wednesday that it held its benchmark interest rate in a range of 4.25%-4.5%, as expected. This marked the fourth straight meeting the Fed kept rates unchanged since cutting rates by 0.25% back in December. Along with its policy announcement, the Fed released updated economic forecasts in its Summary of Economic Projections (SEP), including its "dot plot," which maps out policymakers' expectations for where interest rates could be headed in the future. The central bank raised its projections for inflation and unemployment at the end of this year while lowering its forecast for economic growth. Fed officials see the fed funds rate falling to 3.9% this year, on par with its previous March projection. Coming into the decision, markets had priced in one to two additional rate cuts this year, according to Bloomberg data. The central bank slashed interest rates by a total of 100 basis points in 2024. It is yet to deliver rate cuts so far this year. In 2026, officials see one additional cut; in March, the Fed expected to cut rates twice next year. Twelve officials predict a rate cut this year, with two officials seeing a decrease of more than 0.5%. Most notable in Wednesday's dot plot were forecasts that showed seven FOMC members see no change in rates this year, signaling a more hawkish stance compared to March when four officials saw no change. Two FOMC members expect only one interest rate cut this year. The updated forecasts suggest the Federal Reserve will continue to take a cautious approach as officials attempt to understand the Trump administration's shifting trade narrative and other policy unknowns, such as the implications of the president's tax proposal. Meanwhile, fears over stagflation, a bleak economic scenario in which growth stalls, inflation persists, and unemployment rises have escalated since the start of the year — and Wednesday's projections continued to underscore that sentiment. The SEP indicated the Federal Reserve sees core inflation hitting 3.1% this year, higher than March's projection of 2.8%, before cooling to 2.4% in 2026 and 2.1% in 2027. The Fed also sees the unemployment rate rising to 4.5% this year, higher than its previous forecast of 4.4%. As of May, the unemployment rate stood at 4.2%. Unemployment is expected to remain at that level — 4.5% — through 2026 before ticking down to 4.4% in 2027. The Fed also downgraded its previous forecast for US economic growth, with GDP expected to grow at an annualized pace of 1.4% this year before reaching 1.6% growth in 2026 and 1.8% in 2027. In March, officials saw GDP growth at 1.7% this year before reaching 1.8% in 2026 and 2027. Allie Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
10 hours ago
- Business
- Yahoo
Fed dot plot reveals more divided central bank, but still points to two rate cuts in 2025
The Federal Reserve's latest "dot plot" outlining future interest rate moves suggests the central bank will still cut rates twice this year, unchanged from its March outlook, though June's forecasts shows a more divided Fed weighing its next move on interest rates. The Fed announced Wednesday that it held its benchmark interest rate in a range of 4.25%-4.5%, as expected. This marked the fourth straight meeting the Fed kept rates unchanged since cutting rates by 0.25% back in December. Along with its policy announcement, the Fed released updated economic forecasts in its Summary of Economic Projections (SEP), including its "dot plot," which maps out policymakers' expectations for where interest rates could be headed in the future. The central bank raised its projections for inflation and unemployment at the end of this year while lowering its forecast for economic growth. Fed officials see the fed funds rate falling to 3.9% this year, on par with its previous March projection. Coming into the decision, markets had priced in one to two additional rate cuts this year, according to Bloomberg data. The central bank slashed interest rates by a total of 100 basis points in 2024. It is yet to deliver rate cuts so far this year. In 2026, officials see one additional cut; in March, the Fed expected to cut rates twice next year. Twelve officials predict a rate cut this year, with two officials seeing a decrease of more than 0.5%. Most notable in Wednesday's dot plot were forecasts that showed seven FOMC members see no change in rates this year, signaling a more hawkish stance compared to March when four officials saw no change. Two FOMC members expect only one interest rate cut this year. The updated forecasts suggest the Federal Reserve will continue to take a cautious approach as officials attempt to understand the Trump administration's shifting trade narrative and other policy unknowns, such as the implications of the president's tax proposal. Meanwhile, fears over stagflation, a bleak economic scenario in which growth stalls, inflation persists, and unemployment rises have escalated since the start of the year — and Wednesday's projections continued to underscore that sentiment. The SEP indicated the Federal Reserve sees core inflation hitting 3.1% this year, higher than March's projection of 2.8%, before cooling to 2.4% in 2026 and 2.1% in 2027. The Fed also sees the unemployment rate rising to 4.5% this year, higher than its previous forecast of 4.4%. As of May, the unemployment rate stood at 4.2%. Unemployment is expected to remain at that level — 4.5% — through 2026 before ticking down to 4.4% in 2027. The Fed also downgraded its previous forecast for US economic growth, with GDP expected to grow at an annualized pace of 1.4% this year before reaching 1.6% growth in 2026 and 1.8% in 2027. In March, officials saw GDP growth at 1.7% this year before reaching 1.8% in 2026 and 2027. Allie Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at
Zawya
22-05-2025
- Business
- Zawya
Plan to beef up Fed forecasts hits hurdle among its regional presidents
A proposal for the U.S. Federal Reserve to release detailed economic forecasts after some of its meetings to anchor the discussion of monetary policy is drawing fire from the heads of its regional banks who worry it will be hard to agree on a common outlook and risks further confusing the public. Fed Chair Jerome Powell flagged the need for improved communications in remarks to a central bank strategy conference last week, and former Fed Chair Ben Bernanke presented a plan for staff-generated economic reports and forecasts that would be released after policy meetings four times a year. In his May 16 presentation, Bernanke said releasing a "transparent, complete and comprehensive macro forecast" would help people better understand Fed decisions and what was likely to follow, while highlighting alternative scenarios would give policymakers more flexibility to change course if the outlook changed - such as when inflation veered higher in 2021. It would also bring the Fed in line with what many of its peers are doing. Atlanta Fed President Raphael Bostic, in comments on Tuesday to reporters at a conference in Florida, called Bernanke's proposal "thoughtful and provocative," but questioned the added value of releasing a staff forecast in real time. Staff forecasts are presented internally at the Federal Open Market Committee's eight policy meetings each year, short descriptions are included in the minutes of each meeting released to the public three weeks later, and the full documentation is published five years later along with meeting transcripts. If the staff forecast is issued in real time, "would this be seen as ... the basis upon which the committee makes decisions? I struggle with that because I don't think it would," Bostic said. Among policymakers "there are 19 views, and if we add the staff report, that would be 20." "There's a hunger out there for something more. And the question I'm wrestling with my team is sort of, what's the way to satisfy that hunger? Is there a way to do it that would not lead to perhaps misleading inferences," Bostic said. Others weighed in at a joint appearance with the Atlanta Fed president and at Bernanke's presentation. "I'm always open to ideas about how we can be more transparent," Cleveland Fed President Beth Hammack said. "Practically, getting the committee to agree on one consensus forecast or even a couple of different scenarios is really challenging, and I do worry that just putting out lots more information might not actually guide the public in the right way ... It may actually leave them more confused." 'NEEDS TO BE SIMPLER' One aim of more detailed forecasts would be to deflect some attention from the quarterly "dot plot" chart of policymaker interest rate projections, a public communications tool that has become something of an annoyance for policymakers across the Fed system. A collection of individual submissions by up to 19 policymakers, the quarterly Summary of Economic Projections and rate projections are not aggregated into a shared outlook. Yet financial markets and the public, Fed officials say, still treat each quarterly release as a policy roadmap with undue weight placed on the median of an often wide distribution of numbers. Analysts complain it also leaves unclear what the Fed is reacting to when the rate outlook changes; whether higher rates, for example, stem from higher expected inflation, different perceptions of risk, or changes in more underlying economic forces. But Bernanke's proposal, so far, has largely just revived a battle he fought unsuccessfully when the Fed was revising its policy approach in 2012. A similar idea then was also criticized by regional Fed bank presidents who have their own technical staff, take varying approaches to modeling the economy, and would be cautious in signing off on any new product meant to shape public expectations. Limiting confusion about the Fed's plans - making clear the basis of rate decisions and the economic factors that cause them to change - is a central theme of policymaker discussions right now. Clear communications are considered important to making monetary policy effective by helping markets trade in more informed ways, decreasing volatility around policy decisions, and helping keep broader public expectations in line with the Fed's 2% inflation target. The existing approach to policy, adopted in 2020 when concerns about the COVID-19 pandemic and related high unemployment were dominant, is likely in for extensive revision driven by a common theme: Simpler is better. Changes made to the Fed's approach five years ago included a promise to use higher inflation to offset periods of lower inflation, to not use a low unemployment rate as a sign in itself of future rises in inflation, and a characterization of maximum employment as a "broad and inclusive" goal. The phrase was meant as a statement of fact about the benefits of maximum employment, and echoed the 1970s law that added a jobs "mandate" to the Fed's responsibilities, but was often construed publicly as the central bank delving into issues of economic equity that it could not really resolve. There's broad agreement inside and outside the Fed that the current approach is too complex and needs to be pared down. "A framework should be robust to a broad range of conditions," Powell said last week, warning, for example, that supply shocks and inflation spikes could become more frequent. "If the objective is to communicate to the public what the Fed is trying to do, what it's looking at, then it needs to be simpler," said Carl Walsh, an economics professor at the University of California, Santa Cruz, who dissected the Fed's 2020 framework in a paper that urged it to be clearer in its framework that maintaining stable inflation was one of the preconditions for achieving its employment goal. Officials continue to debate replacement language for the framework, which is likely to be announced in August at the central bank's annual Jackson Hole symposium in Wyoming. The discussion of what additional material to provide around the Fed's policy meetings is a separate debate being carried out in parallel. Powell last week indicated he wants change, but may face a challenge building consensus over what to do. "A common observation is the need for clear communications as complex events unfold," Powell said. "Clear communication is an issue even in relatively placid times." (Reporting by Howard Schneider; Editing by Paul Simao)
Times
08-05-2025
- Business
- Times
Keir Starmer criticises budget watchdog OBR over welfare cuts analysis
Sir Keir Starmer has criticised the Office for Budget Responsibility for failing to 'price in' the impact of the government's welfare reforms on getting people back to work. The prime minister said that he 'personally struggles' with the way the budget watchdog draws up its economic forecasts and assesses the impact of government policies. It is the first time that Starmer has criticised it, having given the body new powers in one of his first acts as prime minister and praising it in opposition. Appearing before MPs on the liaison committee, Starmer also said the UK should not 'jump in with both feet' to retaliate against President Trump's trade tariffs. He said he was not open to 'trading away' the NHS as part of a
Sky News
08-05-2025
- Business
- Sky News
Why many assume interest rates will fall further - but no one really has a clue
Let's deal, first of all, with the question many of you will have: after today's reduction to 4.25% will there be more interest rate cuts to come? Today, the Bank of England did nothing to sway you - or the financial markets that bet on such things - from the assumption that after today's quarter percentage point cut there will be further reductions in the cost of borrowing. Indeed, right now, financial markets assume the Bank will cut UK interest rates down to 3.5% by early next year, and the Bank didn't contradict that today. But (this being economics, there's always a "but") if there was one theme that overarched the Bank's latest set of forecasts, it was that it's becoming fiendishly difficult to predict the future. Take tariffs. In theory, the Bank thinks they'll actually be much less damaging than many had assumed, with the total impact not enough to push the UK into recession. But that's based on a few important assumptions, chief among them that Donald Trump doesn't re-impose the reciprocal tariffs announced on 2 April - despite the fact that he's explicitly said they are only temporarily paused. It was based on the assumption that the UK wouldn't get a trade deal with the US, an assumption that was already out of date by the time the document was published. No one really has a clue The Bank's forecasts are, in other words, even more uncertain than usual. Perhaps that helps explain why the nine members of the Monetary Policy Committee had a rare three-way split in their vote this month, with two members voting to leave rates on hold, two voting to cut them by half a percentage point, and the remaining five carrying the decision and reducing them by 0.25%. Now, even taking this uncertainty into account, there are a few things one can take from today's Bank of England news, and the update from its American counterpart, the Federal Reserve, yesterday. While tariffs are expected to push inflation up in the US, they are expected to push inflation down in the UK. The upshot is while the Federal Reserve is pausing its interest rate cuts, UK rates are coming down. Every Bank of England forecast is, by definition, a historic document. Such things take time to model and write so, by the time they come out, they are always a little bit out of date. But never has this been more true of a Bank forecast than the one published today. The big picture, however, is that no one really has a clue. No one knows what Donald Trump will do next. No one knows what the impact of his tariffs will be on the UK or, indeed, elsewhere. No one knows what this all spells for inflation or unemployment.
