In recent months U.S. inflation has broadly trended lower, despite remaining elevated in historical terms. Despite this, the Fed is planning to move rates above 5% at its early 2023 meetings.
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Federal Open Market Committee meeting in Washington, DC, US. Rates are expected to move higher in 2023. Photographer: Al Drago/Bloomberg, despite remaining elevated in historical terms. Despite this, the Federal Reserve’s updated projections for December show that the majority of policy-makers expected rates to exceed 5% in 2023. In contrast, the last time the Fed shared projections in September, no policy-maker saw rates exceeding 5% in 2023.The Fed’s decision to raise rates 0.
The more interesting angle was the Fed’s provision of economic projections for 2023 and beyond, includingIt appears that peak interest rates will fall in the 5% to 5.5% range for 2023 on the Fed’s latest projections. That implies a few more hikes in interest rates in early 2023, though likely fewer and significantly smaller moves than we’ve seen in 2022.
The markets are broadly on the same page with the Fed’s assessment. Interest rates futures imply a likelihood of more hikes in early 2023, but the Fed most likely holding rates steady by spring in the central case.
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