Federal Reserve officials have significantly raised their expectations for interest rates, inflation and unemployment, a summary of their economic forecasts showed on Wednesday.
The median unemployment forecast by Fed officials at the September policy meeting rose to 4.4 percent for next year, from 3.9 percent at the July meeting. The forecast for 2024 was raised from 4.1 percent to 4.4 percent.
Inflation is now expected to be 2.8 percent by the end of next year, versus 2.6 percent, and 2.3 percent a year later, versus 2.2 percent. The figure for the end was revised from 5.2 percent to 5.4 percent. In July, the latest available date, the personal consumption index — the Fed’s preferred measure of inflation — rose 6.3 percent.
Core PCE prices, which exclude food and energy prices, are now expected to rise at a rate of 5.4 percent by the end of this year and 2.8 percent next year, versus June expectations of 5.2 percent this year year and 2.6 percent in the next year.
Officials now see the Fed’s rate target at 4.4 percent by the end of this year, indicating an expected range of 4.25 percent to 4.50 percent. That’s 125 basis points more hikes in the next two meetings, apparently suggesting that Fed officials expect another 75 basis point hike, followed by a 50 basis point hike. At the July meeting, Fed officials forecast interest rates would rise to just 3.4 percent.
The expectation for next year rose to 4.6 percent, higher than most private sector analyst estimates and well above the 3.6 percent rate forecast in July. In the following year, the interest rate target is expected to fall to 3.9 percent, from 3.4 percent in June.
The Fed also sees significantly lower economic growth this year. At the July meeting, Fed officials expected GDP to grow 1.7 percent this year. Now they only expect 0.2 percent growth. Growth next year is expected to be just 1.2 percent after 1.7 percent and 1.7 percent after 1.9 percent in the following year.
https://www.breitbart.com/economy/2022/09/21/fed-officials-sharply-raise-their-forecasts-of-rates-and-unemployment-downgrade-gdp/ Fed Officials Sharply Raise Their Forecasts of Rates and Unemployment, Downgrade GDP