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According to Federal Reserve projections released on Wednesday, the central bank will raise interest rates as high as 5.6% by 2023 after pausing its hike campaign in June. On Wednesday, the Federal Reserve maintained its target range for the key lending rate at 5% to 5.25%. But its projections, the so-called dot-plot, moved markets, sending them lower as the central bank projected two more increases. That’s if the central bank keeps its rate-hiking pace at quarter-point increments. Fed Chairman Jerome Powell said the next committee meeting in July remains a “live” meeting, signalling that a quarter-point hike isn’t baked in yet. “We didn’t we didn’t make a decision about July. … Of course it came up in the meeting from time to time, but really the focus was on what to do today,” Powell said in a press conference Wednesday. “I would say … two things: One, a decision hasn’t been made. Two, I do expect that it will be a live meeting.”
Eighteen Federal Open Market Committee members indicated their expectations for rates in 2023 and further in the dot plot. Four members saw another rate increase this year, and nine expect two. Two more members added a third hike, while one saw four more. Only two members signalled that they don’t see more hikes this year. The central bank also hiked its forecasts for the next two years, now projecting a fed funds rate of 4.6% in 2024 and 3.4% in 2025. That’s up from respective 4.3% and 3.1% forecasts. Meanwhile, Fed members raised economic growth expectations. The Summary of Economic Projections now shows a 1% expected GDP gain compared to the 0.4% estimate in March. Officials also were more optimistic about unemployment, now seeing a 4.1% rate by year’s end compared to 4.5% in March. On inflation, the central bank raised its forecast to 3.9% for core (excluding food and energy) and lowered it slightly to 3.2% for the headline. Those numbers had been 3.6% and 3.3%, respectively, for the personal consumption expenditures price index, the central bank’s preferred inflation gauge.

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