Federal Reserve officials expect to hike interest rates roughly seven times in 2022, with inflation set to rise and growth set to fall from their estimates in December.
The Fed on Wednesday released new projections from members of the Federal Open Market Committee (FOMC) shortly after the panel announced it would hike interest rates by 0.25 percentage points.
The economic projections are the median estimates from those in charge of setting the bank’s monetary policy. They are not considered a formal Fed forecast but provide insight into the individual expectations of FOMC members.
The median estimate of the year-end federal fund rate rose to 1.9 percent, which implies at least six more interest rate hikes if the Fed only increases rates in 0.25 percentage point increments. Federal Reserve Chair Jerome Powell has not ruled out moving faster on hike rates if inflation continues to spike above the bank’s annual average target of 2 percent.
“Every meeting is a live meeting and we’re going to be looking at evolving conditions,” Powell said.He also noted the Fed’s current projections line up with the bank hiking by 0.25 percentage points in each of its six remaining meetings.
“If we do conclude that it would be appropriate to to move more quickly to remove accommodation, then we’ll do so.”
The FOMC on Wednesday set the federal funds rate at a range of 0.25 to 0.5 percent. The federal funds rate is the benchmark interest rate banks charge on loans to each other and used to set borrowing costs on credit cards, automobile loans and mortgages.
The FOMC’s median estimate of the year-end unemployment rate held at 3.5 percent, in line with their December projections and equal to February 2020 jobless rate. But the FOMC’s median estimate of gross domestic product growth fell from 4 percent to 2.8, while the year-end annual inflation rate they projected rose from 2.6 percent to 4.3 as measured by the personal consumption expenditures price index.
“The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The implications for the U.S. economy are highly uncertain, but in the near term the invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity,” the FOMC said in a statement.
Updated at 4:55 p.m.