The Federal Reserve now forecasts at least two rate hikes by the end of 2023

The Federal Reserve now sees at least two interest rate hikes in 2023, according to the central bank’s so-called dot plot of projections.

Wednesday’s forecast showed 13 members of the Federal Open Market Committee believe the Fed will increase rates in 2023 and the majority of them believe the central bank will hike at least twice that year. Only five members still see the Fed staying pat through 2023. In fact, seven of the 18 members see the Fed possibly increasing rates as early as 2022.

In March, four of the 18 FOMC members were looking for a rate hike at some point in 2022. At the same time, seven members saw a rate increase in 2023.

Every quarter, members of the committee forecast where interest rates will go in the short, medium and long term. These projections are represented visually in charts below called a dot plot.  

Here are the Fed’s latest targets, released in Wednesday’s statement:

This is what the Fed’s forecast looked like in March 2021:

The “longer run” dots remained unchanged from the FOMC’s March meeting.

The Fed also slightly dialed up its economic expectations for 2021, according to its Summary of Economic Projections released Wednesday.

The central bank now expects real gross domestic product to grow 7.0% in 2021, compared with the 6.5% forecast from its March meeting. The Fed also upped its 2023 real GDP forecast to 2.4% from 2.2% expected previously.

The Fed also sharply increased its inflation forecasts for the year. It now sees inflation running to 3.4% this year, above its previous estimate of 2.4%. The central bank also slightly hiked its PCE inflation estimates for 2022 and 2023.

Core PCE inflation is expected to come in at 3.0% in 2021, up from March’s forecast of 2.2%. Core PCE for 2022 is now expected at 2.1% and is projected to stay at that level in 2023.

The Fed still estimates the unemployment rate will fall to 4.5% in 2021. The FOMC expects the rate to drop to 3.8% and 3.5% in 2022 and 2023, respectively.