The Federal Reserve on Wednesday raised its target interest rate by three-quarters of a percentage point on Wednesday to stem a disruptive surge in inflation, and projected a slowing economy and rising unemployment in the months to come.
The action raised the short-term federal funds rate to a range of 1.50% to 1.75%, and Fed officials at the median projected the rate increasing to 3.4% by the end of this year and to 3.8% in 2023 - a substantial shift from projections in March that saw the rate rising to 1.9% this year.
US Market reaction
US stocks pared gains slightly after the Fed hike; S&P last traded higher.
Bonds: US Treasury two-year, 10-year yields rose after the Fed statement.
Forex: The dollar index gained after Fed decision.
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The federal funds rate at the end of 2023 is now projected to be 3.8%, up from the March forecast of 2.8%, while the year-end 2024 rate was seen at 3.4% versus 2.8% in March, reflecting an expectation that the central bank will be cutting rates by that time.
Officials edged up their longer-run policy rate to 2.5% from 2.4%.
Inflation - as measured by the annual change in the Personal Consumption Expenditures price index - is seen ending the year at 5.2%, up from a March projection of 4.3%. As of April, the PCE index was up 6.3% on a year-over-year basis, just below a 40-year high touched in March.
Policymakers see the unemployment rate at 3.7% at the end of this year compared with 3.5% in their March forecasts. The US jobless rate was 3.6% in May. (Reporting by Dan Burns Editing by Paul Simao)