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"Real" Rate Expectations Higher For 2023, Lower For 2024-25

FED

Also note that based on core PCE, the "real" Fed funds rate in the November projections is 2.2% this year, staying constant at 2.2 in 2024, and falling to 1.4% in 2025.

  • This continues a ratcheting up of FOMC real rate expectations for 2023. By comparison September's showed real rates of 1.9% for 2023 (was 1.7% in June), 2.5% in 2024 (was 2% in June), and 1.6% in 2025 (was 1.2% in June).
  • Note that the "real" rate on this basis is a little lower for 2024 and 2025 now vs last time out, but the 2023-24 steadiness arguably points to "higher for longer" policy. This will be a key theme of today's press conference as Powell explains the rationale for the forecast rate cuts next year and beyond.

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