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WASHINGTON, DC – MAY 03: Jerome Powell, Chairman of the Federal Reserve Board, makes remarks at a news conference after a meeting of the Federal Open Market Committee on May 03, 2023 in Washington, DC. The Federal Reserve announced a rate hike of 0.25 percentage point, bringing the key federal funds rate to more than 5%, a 16-year high. (Photo by Anna Moneymaker/Getty Images) (Photo by Anna Moneymaker/Getty Images)
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The Federal Reserve paused its hiking campaign in June, but expects it to raise interest rates to 5.6% before 2023 is over, according to central bank projections released Wednesday.
The Fed held the key lending rate within a target range of 5%-5.25% on Wednesday. But it was the projections, the so-called dot plot, that moved the markets, sending them lower as the central bank predicted two more increases. That is if the central bank maintains its rate hike rate in quarter-point increments.
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Fed Chair Jerome Powell said the next meeting for the committee in July remains a “live” meeting, indicating that a quarter-point increase is not baked in yet.
“We didn’t make a decision about July. … Of course it came up from time to time at the meeting, but the focus was really on what we had to do today,” Powell said at a news conference Wednesday. . “I would say… two things: First, no decision has been made. Second, I expect it to be a live meeting.”
Here are the Fed’s latest goals:
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Eighteen members of the Federal Open Market Committee gave their expectations for rates in 2023 and beyond on the dot chart. Four members saw one more rate increase this year and nine expect two. Two more members added a third walk, while one saw four more. Only two members indicated that they no longer saw walks this year.
The central bank also raised their forecasts for the next two years, now forecasting a fed funds rate of 4.6% in 2024 and 3.4% in 2025. That’s higher than their respective forecasts of 4.3% and 3 .1%.
Meanwhile, Fed members raised their expectations for economic growth. The Summary of the Economic Projections now shows an expected gain of 1% of GDP compared to the estimate of 0.4% in March.
Officials were also more optimistic about the unemployment rate, now standing at 4.1% by the end of the year compared to 4.5% in March.
In terms of inflation, the central bank raised its estimate to 3.9% for core (excluding food and energy) and cut it slightly to 3.2% for headline. Those numbers were 3.6% and 3.3%, respectively, for the Personal Consumption Price Index, the central bank’s preferred gauge of inflation.
— CNBC’s Jeff Cox contributed reporting.
