The Federal Reserve on Wednesday held its benchmark interest rate steady for the first time in over a year, but in a signal that the hiking cycle is not over, officials adjusted their communications to stress that another 50 basis points of rate hikes are on the table this year.
In its forecasts, the Fed was more pessimistic about its progress on lowering inflation. The Fed now expects its favorite inflation measure, the core personal consumption expenditure price index, to end the year at a 3.9% annual rate, up from the prior forecast of 3.6%. It was running at a 4.7% rate in April.Fed Chair Jerome Powell is expected to shed more light on the central bank’s strategy at his press conference at 2:30 p.m. Eastern time Wednesday.
Nine Fed officials expect the benchmark rate to rise to the the 5%-5.75% range. Three expect even more hikes. The Fed staff is forecasting a mild recession beginning in the fourth quarter. Most economists also expect a recession but hope it will be mild. The best outcome would be continued slow economic growth or a very quick downturn — known as a soft landing.
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