MNI: Fed Hikes Rates By 50BPS, Sees End-2023 Rate At 5.1%

The Federal Reserve on Wednesday raised interest rates by half a percentage point to its highest level since 2007, and indicated further monetary tightening is in store, with policymakers raising their end of 2023 median funds rate estimate up to 5.1% from 4.6% in September.

Officials raised their PCE inflation views for this year and next to 5.6% and 3.1% respectively, while downgrading their growth forecasts for 2023 to 0.5% from 1.2%.

FOMC officials repeated in their post-meeting statement their expectation that "ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time."

Fed Chair Jerome Powell will soon face questions from reporters about how convinced he is by the recent softening of inflation. The November CPI report showed a still-elevated headline inflation reading of 7.1% on the year, but that was down from a cycle peak of 9.1% in June. 

In his most recent public remarks, Powell struck a more dovish tone than he had previously, citing signs that goods prices had turned around and that supply chain pressures were easing.

But he also emphasized that wages are still rising at a pace above what is consistent with price stability as the Fed tries to pull inflation back down to its 2% target.

The Fed repeated its characterization of job gains as "robust in recent months." FOMC members revised up their median forecast for the jobless rate for next year to 4.6%, up from 4.4% as of September. The jobless rate stood at 3.7% in November.