As expected, the Fed announced its decision to raise its benchmark rate by 50-bps. This takes the central bank’s “Fed funds” rate to between 425 - 450 bps . However, it was Chairman Powell’s comments regarding his policy outlook during the press conference that garnered the most attention. Market participants and analysts were looking for insight into the forward guidance of the Federal Reserve as it pertains to their monetary policy, inflation, and future rate hikes.
2023 - All of the 19 Federal Reserve members who added their “dot” to the Fed’s projections reflected higher interest rates in 2023. The majority of members anticipate rates to be at 5 ¼%, with four members anticipating rates to go to 5 ½%, two members anticipating rates at 5 ¾% and two members anticipating rates at 4 ¾%.
2025 - all Federal Reserve members anticipate that fed funds rates will be 4 ½% to 3% by the end of 2025. Chairman Powell’s press conference Chairman Powell acknowledged that the last two CPI reports were promising but incomplete. “Data we have received so far on inflation for October and November do show a welcome reduction in price pressures; need substantially more evidence though to be confident inflation coming down.” He also said that “recent data gives us greater confidence in our forecast.”