The Federal Reserve kept interest rates unchanged on Wednesday but signaled in new economic projections that borrowing costs will likely rise by another half of a percentage point by the end of this year.
The Federal Reserve building is pictured in Washington on March 19, 2019. REUTERS/Leah Millis/File PhotoCentral bank officials see two more small hikes this year
Further rate increases would "take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments," it said. Policymakers, however, anticipate 100 basis points of rate cuts in 2024, alongside fast-falling inflation.
"It does seem as if the FOMC members have become even more hawkish since the last meeting, and I think that has taken investors by surprise," said Sam Stovall, chief investment strategist at SFRA Research.The higher rate outlook coincides with an improved view of the economy and, consequently, slower progress in returning inflation to the central bank's 2% target.
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