Fed Leaders Predict Interest-Rate Hikes in Next Two Years

Fed leaders predict three interest-rate jumps in 2022 and in 2023.

According to a nonbinding document released by the Fed last week, Federal Reserve officials predict three interest-rate increases over each of the next two years.

The Federal Reserve uses dot plots to convey its leaders' views on short-term interest rate changes. The graph depicts each leader's personal expectations, which aids the public in determining where interest rates may be heading in the future. Every three months, the Fed publishes a new dot plot on which up to 19 leaders may express their opinions anonymously.

The most recent dot plot,  indicates that the median of Fed officials' predictions foresees a federal funds rate between 0.75 percent and 1% by the end of 2022 and between 1.5 percent and 1.75 percent by the end of 2023. Analysts forecast a total of three hikes in 2022 and three hikes in 2023 to reach that level. The federal funds rate objective is currently between 0% and 0.25%.

In this chart, you can see that Fed officials have become somewhat more hawkish than they were previously. This indicates that they are placing a higher value on low inflation than they did before. In the previous plot, half of Federal Reserve policymakers predicted only one rate increase in 2022.

Keep in mind that the dot plot isn't binding, and they are subject to change, just like meteorologists' forecasts. However, it has been published quarterly since 2012 for transparency - to give the public a better idea of what may be coming their way with interest rates.

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