Fed signals it will raise rates one more time this year before it ends hiking campaign

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Federal Reserve Board Chair Jerome Powell speaks during a news conference following a Federal Open Market Committee meeting at the Federal Reserve in Washington, D.C., on July 26, 2023.

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The Federal Reserve stayed put on Wednesday but forecast it will raise interest rates one more time this year, according to the central bank’s projections released Wednesday.

Projections released in the Fed’s dot-plot showed the central bank would hike rates to a median 5.6% by the end of 2023, up from the current range between 5.25% and 5.5%. Twelve Fed officials attended the meeting and penciled the additional rate hike in, while seven were against it. The Federal Open Market Committee, which sets rates, has projected only two rate reductions in 2024. This is two less than it had predicted in June. That would put the funds rate around 5.1%.

The change to fewer projected rate cuts next year has more to do with Fed officials’ optimism about economic growth than concerns about stubborn inflation, Fed Chair Jerome Powell said in a press conference.

“Broadly, stronger activity means we have to do more with rates, and that’s what that meeting is telling you,” Powell said.

The dot plot also moved higher for 2025, with the median outlook at 3.9%, compared to 3.4% previously.

Here are the Fed’s latest targets:

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As for inflation, the Fed expects that the core personal consumption expenditures price index would decline to 3.7%, down 0.2 percentage points from June.

The projection for the unemployment rate now stands at 3.8%, compared to 4.1% previously.

— CNBC’s Jeff Cox contributed reporting.