Its past four rate moves have come in three-quarter-point. But net migration flows surged in 2023, which appears to be behind a significant increase in the supply of available workers: over the last three years, the number of new labor-force entrants has been its highest since the early 1980s ( Display). The Fed has lifted interest rates from near zero as recently as March to a range of 3.75 to 4 percent at its meeting this month.

What’s driven the last few quarters’ strength, and how does it affect the outlook? Many factors that stoked growth last year, including fiscal stimulus, savings stockpiles and rapid inflation cooling, are fading. Larger Labor Pool Is Providing Economic Support We now expect policy rates to stay where they are for several months, before cuts eventually start late this year. But the process will likely be slower than previously forecast, and that will likely affect the path of Federal Reserve policy-including rate cuts. Robust economic activity has caused inflation to cool more slowly, though we still expect price pressures to ease as the year progresses. In our view, much of that strength will last, supported by changing demographic trends, leading us to increase our 2024 full-year GDP growth forecast to 1.5% in real, or inflation-adjusted, GDP terms. The US economy powered ahead in the first quarter, as strong hiring activity and gradually waning inflationary pressures boosted consumer spending, keeping growth on solid footing. That means a likely delayed start for expected interest-rate cuts.

Stronger economic growth is allowing the Fed to stay patient.

Fed next meeting on interest rates