The Fed projects raising rates as high as 5.1% before ending inflation battle
The Federal Reserve will raise interest rates to 5.1% by 2023, equivalent to a target range of 5%-5.25%. The forecast is higher than the 4.6% projected by the Fed in September. The Fed announced a 50 basis point rate hike Wednesday, taking the borrowing rate to a targeted range between 4.25% and 4.5%, the highest level in 15 years.
The so-called dot plot, which the Fed uses to signal its outlook for the path of interest rates, showed 17 of the 19 “dots” would take rates above 5% in 2023. Seven of the 19 committee members saw rates rising above 5.25% next year. For 2024, the rate-setting Federal Open Market Committee projected that rates would fall to 4.1%, a higher level than previously indicated. “The historical record cautions strongly against prematurely loosening policy. We will stay the course, until the job is done,” Fed Chairman Jerome Powell said during a news conference Wednesday. The series of rate hikes is expected to slow down the economy. The Summary of Economic Projections from the Fed showed the central bank expected a GDP gain of 0.5% for 2023, barely above what would be considered a recession. The committee also raised its median anticipation of its favored core inflation measure to 4.8%, up 0.3 percentage points from the September projections.