FOMC likely reduces rate cut expectations: Berman

On a quarterly basis, the U.S. Federal Open Market Committee (FOMC) updates its summary of economic projections (SEP), also known as the “Dot Plot.”

Slowly, the FOMC is moving the longer-term target higher. In part, it likely reflects the massive deficit funding supply and the recognition that labour market dynamics are lifting longer-term inflation expectations. As we have noted before, these shifts are glacial in nature and are likely more structural than cyclical.

The long-run median expectation is 2.5625 per cent and it could move up to 2.625 per cent with the 2025 dot moving up to 4.1 per cent from 3.875 per cent. The 2024 median dot is at 4.625 per cent and that could move up to 4.875 per cent.