© Bloomberg. Esther George in 2019.
Here are key takeaways from the Federal Reserve’s interest-rate decision and forecasts on Wednesday:
The Fed raised its benchmark rate by 75 basis points — the biggest increase since 1994 — to a range of 1.5%-1.75%, in line with investors’ and economists’ expectations that shifted on Monday following media reports that the central bank would likely consider such a move in wake of pickup in inflation data; Kansas City Fed President Esther George dissented in favor of a 50 basis-point hike
New dot-plot projections showed sharp increase from March, with federal funds target rising to 3.4% by year-end — implying another 175 basis points of tightening this year — and 3.8% in 2023, before falling to 3.4% in 2024; prior forecasts in March were for a 1.9% rate this year and 2.8% in 2023 and 2024
A couple of major changes to the statement: FOMC adds a line saying it’s “strongly committed to returning inflation to its 2% objective” and removes prior language that said the FOMC “expects inflation to return to its 2% objective and the labor market to remain strong”
Economic projections showed a much bumpier soft landing expected, with the unemployment rate rising from 3.7% at end-2022 to 4.1% in 2024; growth forecasts were cut to 1.7% in 2022 and 2023, from 2.8% and 2.2% in March; Fed officials still expect inflation to come down significantly in 2023
Reiterates path on balance-sheet reduction that took effect June 1, shrinking bond portfolio by $47.5 billion a month and stepping up to $95 billion in September
(Bloomberg) — Read More: Bloomberg’s TOPLive blog on the FOMC decision and press conference
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