A child walks past the Marriner S. Eccles Federal Reserve Board Building on Constitution Avenue, NW, on Monday, April 26, 2021.
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Much of the Federal Reserve sees three rate hikes in 2022, according to the central bank’s forecast.
Wednesday’s forecast shows that the 12 FOMC members expect at least three rate hikes over the next year. Five members expect two rate hikes and one member expects one hike in 2022.
That’s the word Forecast for September where half of Fed members have seen at least one increase in 2022.
Quarterly, committee members forecast where interest rates will go in the short, medium and long term. These projections are represented visually in the diagrams below known as dot plots.
Here are the Fed’s latest goals, announced in Wednesday’s statement:
Here is the Fed forecast for September 2022:
The “longer-running” dots remained unchanged from the FOMC’s March meeting.
The Fed has also turned down its GDP projections for this year, according to the Summary of Economic Forecasts released Wednesday.
The central bank now expects real gross domestic product to grow 5.5% in 2021, down from an estimate for a 5.9% increase from its September meeting. The Fed raised its GDP forecast. growth to 4.0% in 2022, up from 3.8%. The central bank downgraded its GDP forecast for 2023 to 2.2% growth, down from September’s 2.5% growth forecast in 2023.
Source: Federal Reserve
The Fed also raised its inflation forecast for the year. Inflation is now up to 5.3% this year, higher than the previous estimate of 4.2%. The central bank increased its PCE inflation estimate for 2022 from 2.2% to 2.6%. The Fed also slightly increased its estimate for 2023.
Core PCE inflation expectations rose to 4.4% in 2021, up from September’s forecast of 3.7%. Core PCE for 2022 is currently predicted at 2.7% and for 2023 is forecasted at 2.3%. This is up from September estimates of 2.3% and 2.2%, respectively.
The central bank now shows the unemployment rate falling to 4.3% this year, lower than the previous estimate of 4.8%.
The regulator also said it would accelerate the reduction of monthly bond purchases on Wednesday. The Fed will be buying $60 billion in bonds each month starting in January, half the amount it was buying in November and $30 billion less than it bought in December.
Central bank benchmark interest rate is kept close to 0 on Wednesday.
