The Federal Reserve lifted its benchmark fed funds rate by 0.25% to a range of 4.75%-5%. Only a year ago, that rate was close to zero. Inflation is expected to be hotter than they had previously thought, the Fed said.
The Federal Reserve moved ahead with another interest-rate hike Wednesday, saying that inflation is now expected to be hotter than they had previously thought.
The Fed’s statement said that “some additional policy firming may be appropriate” to bring inflation back to its 2% target. The central bank’s updated “dot plot” forecast for the fed funds rate now shows only one more rate hike this year. The Fed’s endpoint is a 5%-to-5.25% range. Seven of 11 Fed officials penciled in two rate hikes to come by year-end.Markets are skeptical. Participants still see the central bank lowering interest rates this year. That is a clear sign investors are worries about a sharp downturn, economist said.
The market volatility spread quickly across the globe and eventually led to the merger over the weekend of Swiss banking giant Credit Suisse CSGN, -5.95% CS, -4.09% by rival Swiss investment bank UBS UBS, -2.85% UBSG, -3.71%. Other economists argued that a pause would make the Fed seem distracted and raise concern that the central bank would allow inflation to persistently run above its long-term target.The Fed’s dot plot continued to show rate cuts in 2024 and 2025. The Fed penciled in a low rate of 3.1% by the end of that period.
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