The Fed projects raising rates as high as 5.1% before ending inflation battle

Federal Reserve Bank Board Chairman Jerome Powell answers reporters’ questions during a news conference following a meeting of the Federal Open Market Committee (FMOC) on November 02, 2022 in Washington, DC.

According to the median forecast released on Wednesday, the Federal Reserve will raise interest rates as high as 5.1% by the year 2023.

The terminal rate is equivalent to the target range. In September, the Fed projected 4.6%.

The Fed raised the federal funds rate by 50 basis points on Wednesday to a target range between 4% and 4.5%, the highest level in fifteen years.

The dot-plot, which the Fed uses to signal its outlook for the path of interest rates, shows 17 of the 19dots will take rates above 5% in the next five years. Seven of the committee members thought rates would go up.

The Federal Open Market Committee projected that rates would fall to 4.1% in 2024, higher than the previous projection.

The Fed has new targets.

There is a historical record that cautions against premature easing of policies. The Fed Chairman said during the press conference that they would stay the course.

The rate hikes are expected to have a negative effect on the economy. The Summary of Economic Projections from the Fed showed that the central bank expected a GDP gain of less than half a percentage point.

The committee raised its expectations of core inflation to 4.8%, up from the previous projections.