Last month, the Federal Open Market Committee (FOMC) cut interest rates by 25 basis points in September, bringing the overnight borrowing rate to a range of 4.00%–4.25%. While the move was widely expected, the accompanying Summary of Economic Projections (SEP) revealed meaningful divisions within the committee. The dot plot, illustrating each participant’s view of where the federal funds rate should land over time, showed unusually wide dispersion. Of the 19 participants, six anticipated no further cuts this year, nine projected an additional 50 basis points of easing, and newly appointed Fed Governor Stephen Miran stood out as the likely sole voice calling for a much steeper 125 basis points of cuts in 2025. The rate spread underscores the central tension policymakers face: how far and how fast to ease without risking a resurgence in inflation. Notably, the SEP still shows inflation running above the Fed’s 2% target in the near and medium term, a reminder that the battle on prices is not yet fully won.
Amid the focus on rate dispersion and drama about political influence at the Fed, a key takeaway has been overlooked: growth projections have moved higher. The SEP now sees real GDP expanding by 1.6% this year, 1.8% in 2026, and 1.9% in 2027, compared to June’s forecasts of 1.4%, 1.6%, and 1.8%, respectively. This comes against a backdrop of volatile quarterly data. GDP contracted by 0.5% in Q1, only to rebound with a 3.8% gain in Q2, translating to a 1.5% growth rate for the first half of the year.
On the labor side, the unemployment rate is expected to hold steady at 4.3%, while nonfarm payrolls are projected to add roughly 53,000 jobs. For context, the 50-year long-term unemployment average is 6.1%, highlighting that while conditions are softening, the labor market remains relatively resilient.
As we move into October and the start of Q4, we remain attentive to the macroeconomic backdrop while continuing to seek opportunities amid shifting conditions.
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