The Federal Reserve said Wednesday it expects the fed funds rate to increase by another roughly 1.65 percentage points over the next four policy meetings to end the year above 3%.
To be exact, the midpoint of the target range for the fed funds rate would go to 3.4%, according to the so-called dot plot forecast released by the Fed.
On Wednesday, the Fed raised rates by 75 basis points, or 0.75 percentage point, to a range of 1.5% to 1.75%. One basis point equals 0.01%.
Just five of the 18 Federal Open Market Committee members see the rate ending at a higher level than the midpoint 3.4% rate, while eight members see it about that level. The remaining five members expect the the fed funds rate the end the year at roughly 3.2%.
Every quarter, members of the committee forecast where interest rates will go in the short, medium and long term. These projections are represented visually in charts below called a dot plot.
Here are the Fed’s latest targets, released in Wednesday’s statement:
This is what the Fed’s forecast looked like in March 2022:
The Fed also unveiled its latest inflation and economic growth projections Wednesday.
The central bank sees inflation, as gauged by the personal consumption expenditures price index, rising by 5.2% by year-end. That’s up from a March projection of 4.3%. The core PCE, which strips out volatile food and energy prices, is expected to rise by 4.3% — up from a previous estimate of 4.1%.
As for the economy, the Fed slashed its GDP growth projection for 2022 to 1.7% from 2.8%. The central bank also lowered its growth expectations for 2023 and 2024 to less than 2%.
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The Federal Reserve expects the fed funds rate to increase by another roughly 1.75 percentage points over the next four policy meetings to end the year at 3.4%.