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The Fed kept the “terminal rate,” or the rate at which its benchmark fed funds rate will peak, unchanged from the last estimate in December at 5.1%, equivalent to a target range of 5%-5.25%. The central bank on Wednesday took the benchmark rate a quarter percentage point higher to a range between 4.75%-5%.
The so-called dot plot, which the Fed uses to signal its outlook for the path of interest rates, indicates that a majority of officials (10 out of 18 members) expect only one more rate hike by the end of this year. Seven Fed officials see rates going higher than the 5.1% terminal rate.
For 2024, the rate-setting Federal Open Market Committee projected that rates would fall to 4.3%, slightly higher than its December estimate of 4.1%.
Here are the Fed’s latest targets:
The latest forecast came amid the spreading banking chaos that sent markets onto a roller coaster in March. The Fed and other regulators stepped in with emergency actions to safeguard depositors at failed banks but concerns still linger about a run in deposits at some regional banks.
Fed officials also updated their economic projections. They slightly hiked their expectations for inflation, with a 3.3% rate pegged for 2023, compared to 3.1% in December. Unemployment was lowered to 4.5%, while the outlook for GDP nudged down to 0.4%.
The estimates for the next two years were little changed, except the GDP projection in 2024 came down to 1.2% from 1.6% in December.