The Federal Reserve (Fed) is monitoring inflation and using core PCE inflation as a key indicator. Despite a recent decline in inflation, core PCE inflation remains slightly above the Fed's target of 2%. The Fed's goal is to keep inflation around this level to maintain price stability. While inflation has shown no signs of returning to target, the Fed is cautiously optimistic that its current policy can address risks and support economic growth by adjusting interest rates as needed.
Despite a more positive economic growth outlook, the Federal Reserve still predicts three interest rate cuts in 2024. This is because inflation is still higher than the Fed's target of 2%, and recent data suggests it may not be declining as quickly as hoped. The median projection for the federal funds rate is 4.6% in 2024, down from the current 5.25%-5.50% range.
