As the release of the United States’ fourth-quarter GDP figures draws near, it has become increasingly evident that forecasting the rate of change for this metric remains a significant challenge. Current projections even within the Federal Reserve’s own models show considerable divergence. For instance, the Atlanta Fed’s GDPNow model currently predicts growth at 3.3%, whereas the New York Fed’s equivalent model estimates a much lower rate of 1.8%.
CPI for October came in at 2.6% today, inline with forecasts but persistent inflation remains a key narrative as we finish out the year. Today's 2.6% print aligns closely with projections from our DeepMMT 2 model (more to come on DeepMMT 2 soon) and we anticipate elevated CPI readings through November and December, with modest reductions expected to emerge in early 2025.
The Fed’s recent rate cut on November 7 has been incorporated into the model. After a two-day meeting, the Federal Open Market Committee noted that “economic activity has continued to expand at a solid pace.” The committee lowered the target rate range to 4.50% to 4.75%, as anticipated, with a unanimous decision.
Expectations of another 25-basis-point rate cut on December 18 have also been factored into our model. These projections, derived from the 30-Day Fed Funds futures, currently reflect a 63% probability of a target range of 4.24% to 4.50% for the upcoming decision.