Half of the Fed members now see the central bank hiking rates next year
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The Federal Reserve building is pictured in Washington on Monday, March 8, 2021.
CQ-Roll Call, Inc. | CQ-Roll Call, Inc. | Getty Images
Half of the Federal Reserve members now see the first interest rate hike in 2022, according to the central bank’s so-called dot plot of projections.
The Wednesday forecast indicated that nine out of 18 FOMC members expected a rate increase in 2022. This is an increase from the seven Fed projections in June.
All but one member expects at least one rate increase by 2023. Treyteen of the members have forecasted two rate increases through 2023.
The committee members forecast the direction of interest rates in each quarter. The projections are visually represented in the charts below, which is called a dots plot.
Here are the Fed’s latest targets, released in Wednesday’s statement:
This is what the Fed’s forecast looked like in June 2021:
The “longer run” dots remained unchanged from the FOMC’s March meeting.
In its Summary of Economic Projections published Wednesday, the Fed reduced its GDP project for 2018.
According to its Summary of Economic Projections, the central bank expects that real gross domestic product will grow by 5.9% in 2021. This is down from 7.0% it had projected at its June meeting. Fed increased its GDP projections 2022-2023 by 3.8% and 2.5% to reflect the growth expected.
Source: Federal Reserve
The Fed also increased its inflation forecast for the year. The Fed now expects that inflation will rise to 4.2% in 2019, which is higher than its 3.4% estimate. It also increased the PCE inflation estimates for 2022.
The core PCE inflation forecasts rose to 3.7% for 2021 from June’s prediction of 3%. For 2022, Core PCE inflation is at 2.3%. It is 2.2% forecast for 2023.
Now, the central bank sees unemployment dropping to 4.8% in 2019, which is lower than its previous estimate at 4.5%.
The Fed held benchmark interest rates near zero on Wednesday.
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