By Howard Schneider and Ann Saphir
WASHINGTONSep 21 – The US Federal Reserve on Wednesday raised its target interest rate by three-quarters of a percentage point, to a range of 3.00%-3.25%, and new projections indicate that borrowing costs will rise down to 4.40% by the end of the year before eventually peaking at 4.60% in 2023.
Meanwhile, the quarterly projections of the central bank calculate a slowdown in the growth of the GDP to 0.2% this year to recover to a 1.2% expansion in 2023, well below production potential.
In addition, the entity expects the unemployment rate to rise to 3.8% this year and stand at 4.4% in 2023. Inflation, on the other hand, will slowly return to the Fed’s 2% target in 2025.
No interest rate cuts are anticipated until 2024.
The projected fed funds rate for the end of this year indicates cost of credit increases by another 1.25 percentage points in the Fed’s remaining two policy meetings through 2022, a level that implies another 75 basis point increase to the view
“The committee is strongly committed to returning inflation to its 2% target,” the Federal Open Market Committee said in a statement.FOMC) in announcing its third consecutive increase of 75 basis points, above the increases of a quarter of a percentage point typical of monetary tightening cycles in the United States.
The Fed “anticipates that current increases in the target range of the fed funds rate will be appropriate,” the panel said, reiterating the stance from its previous statement in July.
The updated projection points to a protracted battle by the Fed to quell the highest inflation since the 1980s, and one that could possibly bring the economy to at least the brink of a recession.
Fed Chairman Jerome Powell will hold a press conference at 2:30 p.m. local time (1830 GMT) to provide more details on the central bank’s decision after their two-day meeting.