United States Federal Reserve's Federal Open Market Committee (FOMC) announced on Wednesday its decision to increase its key interest rate by 25 basis points to between 4.75% and 5.00%. Although there are signs of "modest growth" in spending and production, inflation "remains elevated."
In its latest statement, the Fed emphasized that the banking system remains "sound and resilient." The statement also acknowledges that recent events are expected to result in more restrictive credit conditions for households and businesses, weighing on economic activity, hiring, and inflation. Moreover, the Committee plans to reduce further "its holdings of Treasury securities and agency debt, and agency mortgage-backed securities."
On the other hand, according to the Fed's latest economic projections, the Federal funds rate in 2023 is expected to be at 5.1%, unchanged from December's forecast. Meanwhile, the 2024 projection shows the interest rate at 4.3%, 0.2 percentage points higher than the previous estimate. Expectations for GDP growth in 2023 and 2024 were lowered, and unemployment and core inflation forecasts for both 2023 and 2024 remain practically unchanged from December's outlook.
