The Federal Reserve led by Jerome Powell has raised the key US reference rates by 75 basis points, as expected, confirming its intention to proceed with further monetary tightening to fight inflation, which has been traveling to the highest levels since the beginning of the years’ 80.
The US central bank has brought US rates into the range of 3% to 3.25%, a record since 2008, making the third consecutive tightening of 75 basis points.
Focus on the dot plot, that is the table that summarizes the projections on the direction of the rates of the exponents of the FOMC, the monetary policy arm of the Fed.
The dot plot shows that officials are aiming for new rate hikes to reach the terminal rate of 4.6% in 2023.
To be precise, six of the 19 ‘dots’ are in favor of tightening rates in the range between 4.75% and 5% in 2023, with the general outlook pointing to 4.6%, implying hikes. that bring rates to the area between 4.5% and 4.75% (the Fed modifies the fed funds target with changes of quarters of a percentage point).
Also from the dot plot, up to three rate cuts emerged in 2024 and another four in 2025, which would lead to longer-term rates to fall to a median value of 2.9%.
“My main message has not changed since Jackson Hole – said Jerome Powell, head of the Fed, in the press conference that followed the announcement on US rates – The FOMC is strongly determined to bring inflation back to 2%, we will continue until the work is completed ”.