WASHINGTON U.S. central bankers expect that after a final interest-rate hike this year, to 5.6%, they will end next year with short-term borrowing costs at 5.1%, reflecting fewer interest rates cuts than they anticipated three months ago.
That's according to the median of 19 forecasts included in the latest quarterly summary of Federal Reserve policymaker projections published on Wednesday, alongside the Fed's decision to leave its policy rate unchanged in a range of 5.25%-5.50%.
The dialed back pace of anticipated policy easing next year goes hand in hand with what policymakers expect to be mixed progress toward the Fed's 2% inflation goal.
Fed officials now see the personal consumption expenditures price index at 3.3% at year end, versus June's forecast of 3.2%, falling to 2.5% by the end of next year, compared with 2.5% seen in June.
They envision inflation reaching 2.2% by the end of 2025, before finally attaining their 2.0% goal in 2026.
Fed officials expect further reductions in the policy rate as well, to 3.9% by the end of 2025 - above the 3.4% they projected in June - and to 2.9% by the end of 2026.
Overall the updated projections suggest mounting confidence in a "soft landing" scenario for the economy, in which inflation cools without a steep drop-off in economic growth or a sharp rise in the unemployment rate.
Policymakers see U.S. GDP growing 2.1% this year, a notable upgrade from the 1.0% growth projected in June, and expanding by 1.5% next year. Meanwhile the unemployment rate - which is currently at 3.8% - is seen peaking at 4.1% in 2024 - and remaining there for 2025 - versus the 4.5% high-water mark seen in June.
(Reporting by Ann Saphir and Dan Burns; Editing by Andrea Ricci)
