The Federal Reserve 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.
New dot plot projections showed a sharp increase from March, with the 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
The Federal Open Market Committee (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”
Fed officials still expect inflation to come down significantly in 2023.