Officials at the US central bank expect the benchmark rate to rise to 4.4pc by year end and 4.6pc during 2023, pointing to a fourth 0.75pc rise in November.
Fed chairman Jerome Powell said policymakers were “strongly committed” to curbing inflation and that there was no easy way to do this but to keep lifting rates.The central bank officials now forecast the official fed funds rate to reach a high of 4.6 per cent in 2023 before stepping down to 3.9 per cent in 2024.
The target range for the benchmark federal funds rate is now between 3 per cent and 3.25 per cent – the highest since before the 2008 financial crisis, and up from near zero at the start of this year.Financial markets are pricing in the Fed funds rate to end the year at about 4.31 per cent, up from around 4.22 per cent before the latest policy meeting.
These revised projections are up from June, which had unemployment at 3.7 per cent this year, 3.9 per cent next year and 4.1 per cent in 2024.Macquarie’s global currency and rates strategist Thierry Wizman said the increased projections for unemployment showed the Fed was trying to manage expectations on some of the pain that will be felt in the economy where some expect a recession early next year.
“The new projections show the Fed is willing to ease people’s expectations on a slowdown in the economy. I think such projections are more symbolic than they are realistic,” Mr Wizman said. In terms of economic growth, the Fed slashed its forecast to 0.2 per cent this year from a June projection of 1.7 per cent. Next year the bank expects growth to be a miserly 1.2 per cent, again lower than its June forecast of 1.7 per cent. In 2024, the Fed expects growth to be 1.7 per cent, down from its previous forecast of 1.9 per cent.
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