The Federal Reserve (the central bank of the United States) raised interest rates by half a percentage point on Wednesday and expects to raise them by at least another 75 basis points from increases in borrowing costs by the end of 2023, in addition to the high unemployment and a near halt in economic growth.
The US central bank’s expectation that the target federal funds interest rate will rise to 5.1% in 2023 is slightly higher than investors expected ahead of this week’s Federal Reserve meeting.
Only two of 19 Federal Reserve officials expect the overnight deposit and lending rate to stay below 5% next year, indicating they still feel the need to continue their battle against inflation, which has reached highest level in 40 years.
“The (Federal Open Market) Committee is very concerned about inflation risks … Continued increases in the target range would be appropriate to get monetary policy tight enough to bring inflation back to 2 percent,” the Fed said in a statement. a statement nearly identical to the one it issued at its November meeting. for the moment”.
The new statement, approved unanimously, came after a meeting in which officials scaled back the three-quarters of a percentage point rate hike announced after the previous four meetings.
The Fed interest rate, which started the year near zero, is now in the 4.25-4.50% target range, the highest since late 2007.
Inflation is expected to stay above the central bank’s target of at least 2% through the end of 2025 and remain above 3% by the end of next year.
The average unemployment rate is also expected to rise to 4.6% next year from 3.7% currently, an increase that surpasses the level historically associated with a recession.
Gross domestic product is also expected to grow by just 0.5% next year, which is the same rate as expected in 2022, before growth jumps to 1.6% in 2024 and 1.8% in 2025.
