Federal Reserve officials expect interest rates to start rising in 2023, earlier than expected, according to new economic forecasts that forecast faster growth – sharply higher inflation this year.
At the end of its two-day political meeting on Wednesday, the US Federal Reserve kept its key interest rate on real estate, from 0 to 0.25 percent, where it has been since the epidemic began.
Meanwhile, in March, when most Fed officials predicted that current rates would be maintained at least until 2024, the consensus shifted to a de-escalation in 2023, which means that the Central Bank believes that the full rate will pass faster. recovery և tighter monetary. politics
The median estimate for Fed officials now forecasts GDP growth of 7 percent this year, up from 6.5 percent in March, and unemployment falling to 4.5 percent from previous forecasts. The main inflation rate this year is expected to be 3%, sharply higher than the 2.2% expected in March, before falling to 2.1% in 2022.
“Advances in vaccines have reduced the spread of Covid-19 in the United States,” said the Federal Open Market Committee. “In the face of this progress և strong political support, economic activity և employment rates have strengthened. The areas with the most negative impact from the epidemic remain weak, but are improving. ”
The FOMC maintained its level on Wednesday Asset purchases are stable $ 120 billion a month is another feature of the loose monetary policy, which was introduced to combat the economic downturn. Officials are expected to hold preliminary talks on the terms and time of the final step to begin reducing that bond purchase, but the announcement does not mention a shift.
The Fed’s debt-cutting process, known as “shrinkage,” could be discussed months before any action is taken. The Fed said the economy needed to make “significant further progress” from December to begin reducing its extraordinary support for the economy.
The Fed stressed that its monetary policy guideline is not a calendar, but depends on economic results. In particular, it says, it will only raise interest rates if the economy is in full employment, with inflation at 2% and on track to exceed that level after some time. However, while seven of the 18 FOMC members predicted a first rate hike in March 2023, 13 did so on Wednesday.
US stock markets have rallied since the last meeting of the FOMC in April, while borrowing costs have fallen from recent highs as investors say the Fed will maintain its monetary stimulus և this year. inflationary pressures will be transient.