Fed policymakers see upward march in interest rates starting next year
Half of Federal Reserve policymakers now expect to start raising interest rates next year and think rates should rise to at least 1per cent by the end of 2023, reflecting a growing consensus that gradually tighter policy will be needed to keep inflation in check.The swifter pace of interest rate hikes fro
Half of Federal Reserve policymakers now expect to start raising interest rates next year and think rates should rise to at least 1per cent by the end of 2023, reflecting a growing consensus that gradually tighter policy will be needed to keep inflation in check.
The swifter pace of interest rate hikes from policymakers' last set of projections in June comes amid the fastest economic recovery in U.S. history after a brief recession last year and robust debate at the Fed about balancing its maximum employment and 2per cent average inflation goals.
The Fed on Wednesday kept its benchmark overnight lending rate in the current target range of 0per cent to 0.25per cent, where it has remained since March 2020 when the U.S. economy was buffeted by the onset of the pandemic.The new economic projections released alongside the policy statement showed nine of 18 Fed policymakers now foresee a liftoff in interest rates next year, compared to seven in June. All but one saw at least one interest rate needed by the end of 2023, and nine saw the need to target rates at least as high as between 1per cent and 1.25per cent by then. headtopics.com
By 2024, the median rate forecast was for 1.8per cent - still below the 2.5per cent level they estimate neither stimulates nor restricts economic growth over the long run and therefore broadly accommodative of further job gains. That's despite policymakers' forecast for inflation to remain above the Fed's 2per cent target through 2024.
Combined, it's new fodder for understanding how the Fed intends to carry out its new policy framework, under which it will aim for inflation to remain moderately above its 2per cent target for"some time."U.S. gross domestic product at the median is projected to grow 5.9per cent this year and 3.8per cent in 2022, compared to forecasts in June of 7.0per cent in 2021 and 3.3per cent next year.
The unemployment rate is seen falling to 4.8per cent this year and to 3.8per cent in 2022.The pace of price increases is expected to rise to 4.2per cent this year, higher than forecast in June, although Fed policymakers see it declining to 2.2per cent in 2022 and 2.1per cent by 2024.
(Reporting by Lindsay Dunsmuir and Ann Saphir; Editing by Paul Simao and Andrea Ricci) Read more: CNA »
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