On Wednesday, the Federal Reserve announced a 25 basis-point rate hike, which came in as expected. This brings the current range to between 4.75% to 5%. The policy-making committee also implied one more interest rate hike going forward based on the central bank’s summary of economic projections.
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In December, the Federal Reserve had projected Fed Funds rates of 5.1% and 4.1% for 2023 and 2024, respectively. Interestingly, the updated projection now stands at 5.1% and 4.3%, respectively. Moreover, its real GDP forecast for 2023 fell to 0.4%, compared to its December expectation of 0.5%.
Furthermore, the central bank’s board members and presidents weighed in on PCE inflation and now expect it to be 3.3% in 2023. For reference, they had forecast 3.1% in the previous report.
It’s clear that recession risks continue to grow as inflation estimates rise while GDP expectations continue to fall. In addition, it would appear that the Federal Reserve is not too worried about the recent banking issues since they’re sticking to their rate-hiking plans.