Federal Reserve Bank Board Chairman Jerome Powell answers reporters’ questions during a news conference following a meeting of the Federal Open Market Committee (FMOC) on November 02, 2022 in Washington, DC.
Getty Images | Chip Somodevilla
The Federal Reserve will hike interest rates as high as 5.1% in 2023 before the central bank ends its fight against runaway inflation, according to its median forecast released on Wednesday.
The expected “terminal rate” of 5.1% is equivalent to a target range of 5%-5.25%. The forecast is higher than the 4.6% projected by the Fed in September.
The Fed announced a 50-basis-point rate hike Wednesday, taking the borrowing rate to a targeted range between 4.25% and 4.5%, the highest level in 15 years.
The so-called dot-plot, which the Fed uses to signal its outlook for the path of interest rates, showed 17 of the 19 “dots” would take rates above 5% in 2023. Seven of the 19 committee members saw rates rising above 5.25% next year.
For 2024, the rate-setting Federal Open Market Committee projected that rates would fall to 4.1%, a higher level than previously indicated.
Here are the Fed’s latest targets:
The series of rate hikes are expected to slow down the economy. The Summary of Economic Projections from the Fed showed that the central bank expected a GDP gain of 0.5%, barely above what would be considered a recession.
The committee also raised its median anticipation of its favored core inflation measure to 4.8%, up 0.3 percentage points from the September projections.