London, Wednesday, 21 September 2022
At its September meeting, the Fed increased the federal funds rate by 75 basis points to a range of 3%-3.25%, marking the third consecutive three-quarter point hike and the highest borrowing prices since 2008. The target range would likely continue to grow, as expected by policymakers, which was reaffirmed by Chair Powell during the press conference.
"We must put inflation in the past. I wish there was an easy method to accomplish that. There's none. The so-called "dot plot" indicated that interest rates would likely increase to 4.4% by December, up from the 3.4% forecast in June, and then reach 4.6% the following year.
In the meantime, predictions for GDP growth were cut back, indicating a 0.2% expansion this year instead of the 1.7% seen in June and a 1.2% expansion in 2023 instead of the 1.7% seen in June.
The PCE measure of inflation is expected to reach 5.4% in 2022 (up from the June projection of 5.2%) and 2.8% in 2023 (up from 2.6%). Additionally, the projected unemployment rates were slightly raised, rising to 3.8% (from 3.7% this year) and 4.4% (from 3.9% next year).
(Source: Federal Reserve // Edited by: Susanne Berger Finance editor, The Decision Maker)