United States Federal Reserve Building, Washington DC
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The Federal Reserve will raise rates just one more time in 2023 before the central bank ends its inflation battle, according to its median forecast released Wednesday.
The Fed kept its terminal rate, or the rate at which its benchmark Fed Funds rate will peak, unchanged from its last estimate in December at 5.1%, which corresponds to a target range of 5%-5.25% . On Wednesday, the central bank raised the benchmark interest rate a quarter of a percentage point higher to a range between 4.75% and 5%.
The so-called dot chart, which the Fed uses to indicate its rate path outlook, indicates that a majority of officials, 10 of its 18 members, expect only one more rate hike by the end of this year. Seven Fed officials see interest rates move above the final rate of 5.1%.
For 2024, the Federal Open Market Committee predicted rates to fall to 4.3%, slightly higher than December’s estimate of 4.1%.
Here are the Fed’s latest goals:
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The latest forecast came amid the spreading banking chaos that sent markets on a roller coaster ride in March. The Fed and other regulators stepped in with emergency measures to protect depositors at failed banks, but concerns remain about a run on deposits at some regional banks.
Fed Chairman Jerome Powell said the market will be wrong if it prices in rate cuts later this year.
“Participants aren’t seeing rate cuts this year. They’re just not seeing it,” Powell said at a news conference Wednesday.
Fed officials have also updated their economic forecasts. They raised their inflation expectations slightly, with a pegged rate of 3.3% for 2023, compared to 3.1% in December. Unemployment was reduced to 4.5%, while the outlook for GDP fell to 0.4%.
Estimates for the next two years have changed little, except that the GDP projection in 2024 has fallen from 1.6% in December to 1.2%.
