The Federal Reserve will hike interest rates just one more time in 2023 before the central bank ends its inflation battle, according to its median forecast released Wednesday.
The Fed kept the "terminal rate," or the rate at which its benchmark fed funds rate will peak, unchanged from the last estimate in December at 5.1%, equivalent to a target range of 5%-5.25%. The central bank on Wednesday took the benchmark rate a quarter percentage point higher to a range between 4.75%-5%.
The so-called dot plot, which the Fed uses to signal its outlook for the path of interest rates, indicates that a majority of officials, 10 out of 18 members, expect only one more rate hike by the end of this year. Seven Fed officials see rates going higher than the 5.1% terminal rate.
For 2024, the rate-setting Federal Open Market Committee projected that rates would fall to 4.3%, slightly higher than its December estimate of 4.1%.
Here are the Fed's latest targets:
The latest forecast came amid the spreading banking chaos that sent markets onto a roller coaster in March. The Fed and other regulators stepped in with emergency actions to safeguard depositors at failed banks, but concerns still linger about a run in deposits at some regional banks.
Fed Chairman Jerome Powell said the market is getting it wrong when it prices in rate cuts later this year.
"Participants don't see rate cuts this year. They just don't," Powell said in a press conference Wednesday.
Fed officials also updated their economic projections. They slightly hiked their expectations for inflation, with a 3.3% rate pegged for 2023, compared with 3.1% in December. Unemployment was lowered to 4.5%, while the outlook for GDP nudged down to 0.4%.
The estimates for the next two years were little changed, except the GDP projection in 2024 came down to 1.2% from 1.6% in December.