Proactive Investors - The Federal Reserve, as expected, left interest rates unchanged following its two-day meeting in a decision released Wednesday afternoon.
The move isn’t a reversal of the current tightening cycle but rather a pause, with the Fed indicating that at least one more rate hike is expected later in 2023. Such a move would be the 12th increase since the current cycle started in March 2022.
According to the central bank’s dot-plot projections, one additional cut is likely this year followed by a pair of cuts in 2024. That’s actually two fewer cuts than projected after the Fed’s last meeting in June, indicating that interest rates will likely remain higher for an extended period of time.
Specifically, 12 Fed members expressed approval of an additional hike this year, while 7 opposed.
Inflation, which has been an ongoing target of the Fed’s tightening cycle, clocked in at 4.2% in July, still well above the 2% target.
For now, rates remain in a target range of 5.25% to 5%, the highest level in more than two decades. Looking ahead, the median rate projection for 2025 rose to 3.9% from 3.4%.
Committee members also issued improved economic growth projections. The central bank now expects US GDP to rise 2.1% this year, more than double its estimate in June. The 2024 GDP estimate jumped to 1.5% from 1.1%.