Combined with other economic data showing the worst reading of consumer confidence since the 1970s, the pessimistic outlook pushed the Fed to entertain the idea of abandoning its prior plan. The decision to raise interest rates by 0.75% was an abrupt turn from last week, when markets had largely expected the central bank to follow through on its communicated strategy of raising by 0.50%.īut a hot inflation report on Friday, showing the fastest pace of price increases since 1981, showed little sign of alleviating price pressures in the month of May. economy to grow by only 1.7% this year, compared to the 2.8% it had forecast in March.įed officials also suggested they could see unemployment rise this year, with the median member now forecasting a 3.7% headline unemployment rate by the end of the year (which would be a notch up from the 3.6% recorded in May). The central bank also downgraded expectations on other key economic measures, expecting the U.S. The median Fed policymaker now expects prices to rise by 5.2%, as measured by personal consumption expenditures (PCE), over the course of 2022, a faster pace than the 4.3% it had forecast in March. The urgency to move faster coincided with Fed policymakers’ expectations that inflation will not abate as fast as they had expected in their March projections. The Fed's "dot plot" now suggests a much more aggressive path for interest rates this year, with benchmark rates expected to hit 3.4% by year-end.
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