Half of Fed members now consider central bank rate hike next year

Half of Fed members now consider central bank rate hike next year

The Federal Reserve building is pictured on Monday, March 8, 2021 in Washington.

Caroline Brehman | CQ-ROLL CALL, INC. | Getty Images

Half of Federal Reserve members are now seeing interest rate hikes for the first time in 2022, according to what is known as the central bank’s projection dot plot.

Wednesday’s forecast showed that nine of the 18 FOMC members expect a rate hike in 2022. That’s down from seven in the June Fed estimate.

In addition, all but one member expect at least one rate hike by the end of 2023. Thirteen members are forecasting two rate hikes by 2023.

Each quarter, committee members predict where interest rates will go in the short, medium and long term. These projections are called a dot plot in the graph below.

Here are the latest Fed targets published in Wednesday’s press release:

The Fed’s forecast for June 2021 was something like this:

The “long-term” points remained unchanged from the March FOMC meeting.

The Fed has also closed its GDP plans for this year, according to a summary of economic projections released on Wednesday.

The central bank now expects real GDP growth of 5.9% in 2021, lower than the 7.0% growth forecast from the June meeting. The Fed has raised its GDP projections for 2022 and 2023 to 3.8% and 2.5%, respectively.

Source: Federal Reserve

The Fed also increased its inflation forecast for the year. It now posts inflation this year at 4.2%, up from its previous estimate of 3.4%. The central bank also slightly raised its PCE inflation forecast for 2022.

Core PCE inflation expectations reached 3.7% in 2021, well above June’s 3% forecast. The Core PCE is now expected to be 2.3% for 2022 and 2.2% for 2023.

The central bank now sees the unemployment rate drop to 4.8% this year, up from its previous estimate of 4.5%.

The Fed kept its key rates close to zero on Wednesday.

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