In an effort to balance risks to the economy with a still unresolved fight to control inflation, “holding the target (interest rate) range steady at this meeting allows the committee to assess additional information and its implications for monetary policy,” the rate-setting Federal Open Market Committee said in a unanimous policy statement issued at the end of its latest two-day meeting.
The new projections, adding a hawkish tilt to Wednesday’s interest rate decision, show policymakers at the median see the benchmark overnight interest rate rising from the current 5.00%-5.25% range to a 5.50%-5.75% range by the end of the year. Half of the 18 Fed officials penciled in their “dot” at that level, with three seeing the policy rate moving even higher – including one official who sees it rising above 6%.
Policymakers, however, see 100 basis points of rate cuts in 2024, alongside fast-falling inflation.
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.
The jobless rate as of May was 3.7%.
Fed Chair Jerome Powell will hold a press conference at 2:30 p.m. EDT (1830 GMT) to elaborate on the outcome of the meeting.
The central bank’s policy rate, which influences household and business borrowing costs throughout the economy, rose a full 5 percentage points from the onset of the tightening cycle in March 2022, reaching the highest level since just before the start of the 2007-2009 recession.
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