United States Federal Reserve building, Washington D.C.
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The Federal Reserve will hike interest 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 the “terminal rate” unchanged from the last estimate in December at 5.1%, equivalent to a target range of 5%-5.25%. The central bank on Wednesday took the benchmark federal funds rate a quarter percentage point higher to a range between 4.75%-5%.
The so-called dot plot, which the Fed uses to signal its outlook for the path of interest rates, indicate that a majority of officials (10 out of 18 members) expect only one more rate hike ahead by the end of this year. Seven Fed officials see rates going higher than the 5.1% terminal rate.
For 2024, the rate-setting Federal Open Market Committee projected that rates would fall to 4.3%, slightly higher than its December estimate 4.1%.
Here are the Fed’s latest targets:
The latest forecast came amid the spreading banking chaos that sent markets onto a roller coaster ride. The Fed and other regulators stepped in with emergency actions to rescue failed banks but concerns still linger as the crisis continued to unfold.
Fed officials also updated their economic projections. They slightly hiked their expectations for inflation, with a 3.3% rate pegged for 2023, compared to 3.1% in December. Unemployment was lowered to 4.5%, while the outlook for GDP nudged down to 0.4%.
The estimates for the next two years were little changed, except the GDP projection in 2024 came down to 1.2% from 1.6% in December.
