As widely expected, the Federal Reserve held off on another hike in the federal funds rate for June, keeping it in a target range of 5% to 5.25% after 10 consecutive hikes. However, Federal Open Market Committee projections released Wednesday indicated that two more hikes are on the way and that rates could rise to 5.6% by the end of 2023.
“Keeping the target range stable at this meeting allows the Committee to assess additional information and its implications for monetary policy,” according to the FOMC statement. However, the FOMC signaled that it could raise the rate again at its next meeting.
“In determining the degree of additional policy tightening that may be appropriate to return inflation to 2% over time, the Committee will take into account the cumulative tightening of monetary policy, the delays in monetary policy affects economic activity and inflation, and the economy and inflation. financial evolution,” according to the statement. At the news conference following the announcement, Fed Chairman Jerome Powell said the central bank has “a long way to go” before reaching that inflation target.
Eighteen FOMC members indicated their expectations for rates in 2023 and beyond in a so-called “dot plot” of projections. Four members saw one more rate increase this year, while nine expect two.
Two other members added a third climb, while one saw four more. Only two members said they do not anticipate further increases this year. The Dow Jones Industrial Average fell nearly 300 points after the decision, pushed lower by the projection of more rate hikes.
Committee members also raised their forecasts for the next two years, now projecting a fed funds rate of 4.6 percent in 2024 and 3.4 percent in 2025, CNBC reported. This is up from the respective previous forecasts of 4.3% and 3.1%.
Pictured: Fed Chairman Jerome Powell at a news conference in May 2023.
