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If there has been one consistent theme in Jerome Powell’s statements throughout the inflation crisis, it’s been this: we’re not done yet. Whenever he was asked about future rate hikes, he repeated the same mantra of doing whatever is necessary to rein in inflation but not yet knowing where the ceiling was. Now, one year into the most aggressive tightening cycle since the early 1980s, that ceiling appears to be in sight.
According to the projections published Wednesday after the latest FOMC meeting had concluded, 10 of the 18 meeting participants anticipate one more 25 basis point hike this year, while one FOMC member even sees the current rate as the end point of this tightening cycle. While seven meeting participants expect that that the federal funds rate will be raised by another 50 to 100 basis points by the end of the year, none believes that it will climb beyond 6.00 percent.
For next year and beyond, the committee members expect interest rates to return to lower levels, with the median projection for the longer run, i.e. beyond 2025, being 2.5 percent, unchanged from the December projection.
This chart shows FOMC members’ projections for the appropriate target level of the federal funds rate at the end of the specified year.
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