The Federal Reserve’s March 2024 projection continues to expect the federal funds rate will be lowered to 4.6% (median forecast) this year, implying multiple rate cuts from current levels , and keeping with projections made in December of last year.
“If they stick to the forecast and reduce rates this year, that’s going to impact the equity and commodity markets, the economy overall, the U.S. dollar, and will likely increase demand for recycled materials” says ISRI’s Chief Economist and Director of Commodities Joe Pickard.
Reduced rates would ease access to credit for businesses, encourage expansions and potentially reduce business costs. A steady hand is needed as Powell noted that lowering rates rapidly risks losing the battle against inflation and likely having to raise rates to even higher levels, while waiting too long poses danger to economic growth. “Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated… The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance,” said Powell.
Though there may be light at the end of the tunnel, the Fed cautioned that inflation levels remain elevated and that the future path of target interest rates will depend on economic developments. Fed Chair Jerome Powell stated, “if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraints at some point this year.”
“The housing market has strengthened over the past couple of months as has industrial production, creating an uptick in recycled material demand. That coupled with current job gains, low unemployment and inflation continuing to cool, means it’s a good possibility we will actually see these rate cuts,” said Pickard.
In addition to the rate announcement, the Fed revised their median economic projections for 2024 in March. The previous projections were released in December 2023. The projection for real gross domestic product (GDP) growth in 2024 was raised to 2.1%, from 1.4% previously; the unemployment rate forecast was lowered to 4.0%, from 4.1% previously; and the forecast for their key inflation metric, core personal consumption expenditures (PCE), was increased to 2.6%, from 2.4% previously.
