Federal Reserve Chairman Jerome Powell speaks during a news conference at Federal Reserve headquarters July 27, 2022 in Washington, DC.
Drew Angerer | Getty
The Federal Reserve will hike interest rates up to 4.6% in 2023 before the central bank ends its fight against rising inflation, according to its median forecast released on Wednesday.
The Fed raised interest rates by another three-quarters of a percentage point on Wednesday to a range of 3% to 3.25%, the highest level since early 2008.
The median forecast also showed that central bank officials expect to hike rates to 4.4% by the end of 2022. With only two policy meetings left in the calendar year, chances are the central bank could deliver another 75 basis point rate hike before year-end.
The so-called dot plot, which the Fed uses to signal its outlook for the rate path, showed that six of the 19 “dots” would push rates even higher next year, to a range of 4.75% to 5 %.
Here are the Fed’s latest targets:
Zoom In IconArrows pointing outwards
The string of large rate hikes is expected to slow the economy. The Fed’s summary of economic forecasts showed that the unemployment rate will rise to 4.4% by next year from the current 3.7%. Meanwhile, GDP growth is forecast to slow to just 0.2% in 2022.
With the aggressive tightening, headline inflation, as measured by the Fed’s preferred consumer spending index, is expected to fall to 5.4% this year. The figure was 6.3% in August. Fed officials expect inflation to eventually fall back to the Fed’s 2% target by 2025.