Fed officials lift year-end peak rate projection to 5.6%

Most Federal Reserve officials now expect the central bank's benchmark rate to top out at 5.6% at the end of 2023, according to the central bank's Summary of Economic Projections published on Wednesday. That's 50 basis points (two rate hikes) higher than the 5.1% projected peak logged in the March outlook.

The latest outlook came from the Fed's so-called dot plot, a closely watched scatter chart of expectations for the path of interest rates, through which each of the 18 members of the rate-setting Federal Open Market Committee assign a dot for what they reckon is the midpoint of the federal funds rate's range at the end of each of the next three years and over the longer term.

Rate cuts will start in 2024, with the median dot for that period also raised to 4.6% from 4.3% in March, as inflation, albeit easing, proved stickier than some policymakers had anticipated. From there, the rate is expected to fall to 3.4% (vs. 3.1% in March view). And the median long-term dot was unchanged at 2.5%.

Now, only two FOMC voting members expect rates to be at the current target range of 5.0%-5.25%, compared with the 11 officials that opted for that range in March.

Earlier, the FOMC kept its policy rate unchanged at 5.0%-5.25%, snapping a streak of 10 straight rate hikes over 14 months, as policymakers assess the impacts of the 5 percentage points of hikes they already implemented.