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Wednesday’s forecast showed 12 Federal Open Market Committee members expect at least three rate raises next year. Five members expect two rate hikes and one member expects one hike in 2022.
That’s up from September’s forecast where half of the Fed members saw at least one hike in 2022.
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 September 2021:
The Fed also dialed down its GDP projections for this year, according to its Summary of Economic Projections released Wednesday.
The central bank now expects real gross domestic product to grow 5.5% in 2021, down from its estimate of 5.9% growth from the September meeting.
The Fed raised its GDP projections to growth of 4.0% in 2022, up from 3.8%. The central bank lowered its GDP projections for 2023 to growth of 2.2%, down from September’s project of 2.5% growth in 2023.
Source: Federal Reserve
The Fed also increased its inflation forecast for this year, 2022 and 2023. It now sees inflation running to 5.3% this year, above its previous estimate of 4.2%. The central bank hiked its PCE inflation estimate for 2022 to 2.6% from 2.2%. The Fed also slightly raised its estimate for 2023.
Core PCE inflation expectations ramped up to 4.4% in 2021, up from September’s forecast of 3.7%. Core PCE for 2022 is now expected at 2.7% and for 2023 is forecast to be 2.3%. Those are up from September’s estimates of 2.3% and 2.2%, respectively.
The central bank now sees the unemployment rate dropping to 4.3% this year, lower that its previous estimate of 4.8%.
The governing body also said it will accelerate the reduction of its monthly bond purchases on Wednesday. The Fed will be buying $60 billion of bonds each month starting January, half the level prior to the November taper and $30 billion less than it had been buying in December.
The central bank held benchmark interest rates near zero on Wednesday.