© Reuters. The exterior of the Marriner S. Eccles Federal Reserve Board Building is seen in Washington, D.C., U.S., June 14, 2022. REUTERS/Sarah Silbiger
(Reuters) – Federal Reserve officials on Wednesday ratcheted up their forecasts for where their target interest rate will be at the end of this year and next, and signaled they expect less near-term relief from inflation than they did three months ago.
New quarterly forecasts from U.S. central bank officials released on Wednesday alongside a three-quarters-of-a-percentage-point interest rate increase showed the median expectation for their benchmark policy rate climbing to 3.4% by the end of 2022. In March that rate was projected at 1.9%.
The federal funds rate at the end of 2023 is now projected to be 3.8%, up from the March forecast of 2.8%, while the year-end 2024 rate was seen at 3.4% versus 2.8% in March, reflecting an expectation that the central bank will be cutting rates by that time.
Officials edged up their longer-run policy rate to 2.5% from 2.4%.
Inflation – as measured by the annual change in the Personal Consumption Expenditures price index – is seen ending the year at 5.2%, up from a March projection of 4.3%. As of April, the PCE index was up 6.3% on a year-over-year basis, just below a 40-year high touched in March.
Policymakers see the unemployment rate at 3.7% at the end of this year compared with 3.5% in their March forecasts. The U.S. jobless rate was 3.6% in May.