15 December 2022 | Other

Fed will raise rates as high as 5.1% before it stops fighting inflation

According to the median estimate released Wednesday, the interest rate is likely to peak at 5.1% next year. As the Fed raises its cash rate to the median level, the fight against inflation will be over. 

This move will take the rate to the targeted range between 5% and 5.25%. By contrast, in September, the Fed forecasted hiking interest rate as high as 4.6%. 

The Federal Reserve raised its benchmark interest rate by 50 basis points on Wednesday. The hike brought it to between 4.25% and 4.5%. The current interest rate hit the highest level since 2007.

According to the Fed's dot plot, which includes each participant’s forecast for the path of rate hikes, 17 out of 19 "dots" indicate that the rate will be above 5% next year. Seven participants expect the rate to be above 5.25%.

The Federal Open Market Committee sees the rate dropping to 4.1% by 2022, which is higher than expected.

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