Fed offers another big rate hike, sees another big move higher this year According to Reuters

© Reuters. FILE PHOTO: The Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 19, 2019. REUTERS/Leah Millis/File Photo

By Howard Schneider and Ann Saphir

WASHINGTON (Reuters) – The Federal Reserve raised its target interest rate by 3/4 percentage point to the 3.00%-3.25% range on Wednesday and signaled more big increases to come in the coming weeks. New forecasts show its policy rate rising to 4.40%. by the end of the year before hitting 4.60% in 2023 in response to continued strong inflation.

Meanwhile, the US central bank’s quarterly economic projections suggest the economy is slowing to growth in 2022, with year-end growth at 0.2%, rising to 1. 2% in 2023, far below the potential of the economy. The unemployment rate is expected to rise to 3.8% this year and 4.4% in 2023. Inflation is said to be slowly returning to the Fed’s 2% target by 2025.

A rate cut is not anticipated until 2024.

The federal funds rate projected for the end of the year signals the total number of additional 1.25 percentage points rate hikes to come in the Fed’s two remaining policy meetings in 2022, a level that implies a another 75 basis point increase in the near future.

“The Committee is strongly committed to bringing inflation back to the 2% target,” the Fed said in a statement announcing the third consecutive 75 basis point increase, significantly above the percentage increase. Fed’s usual score.

The Fed “anticipates that continued gains within the target range will be appropriate,” the statement from its policy-making Federal Open Market Committee said, echoing language from its previous statement. them in July.

Updated projections point to a protracted battle by the Fed to quell the highest inflation since the 1980s and a fight that is likely to push the economy at least to the edge of recession.

“Recent indicators suggest modest growth in spending and manufacturing,” the Fed said, but the economy is still seen as slowing this year, with year-end growth of just 0.2 percent.

The unemployment rate rose from 3.8% at the end of 2022 to 4.4% by the end of 2023, while above the half-percent increase in unemployment associated with past recessions.

Fed Chair Jerome Powell will hold a press conference at 2:30 p.m. EDT (1830 GMT) to detail the two-day policy meeting.

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