The majority of Fed members predict three rate hikes in 2022 to fight inflation

A child walks past the Marriner S. Eccles Federal Reserve Board Building on Constitution Avenue, NW, Monday, April 26, 2021.

Tom Williams | CQ-Roll Call, Inc. | Getty pictures

The majority of the Federal Reserve sees three interest rate increases in 2022, according to the central bank̵[ads1]7;s so-called dot plot of projections.

Wednesday’s forecast showed that 12 members of the Federal Open Market Committee expect at least three interest rate hikes next year. Five members expect two interest rate increases and one member expects one interest rate increase in 2022.

It is up from the September forecast where half of the Fed members saw at least one increase in 2022.

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

Here is the Fed’s latest goal, released in Wednesday’s statement:

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

The “longer runs” points remained unchanged from the FOMC’s September meeting.

The Fed also lowered its GDP estimates for this year, according to the summary of economic estimates released on Wednesday.

The central bank now expects real gross domestic product to grow 5.5% in 2021, down from the estimate of 5.9% growth from the September meeting.

The Fed raised its GDP estimates to a growth of 4.0% in 2022, up from 3.8%. The central bank lowered its GDP estimates for 2023 to a growth of 2.2%, down from the September project of 2.5% growth in 2023.

Source: Federal Reserve

The Fed also increased its inflation forecast for this year, 2022 and 2023. It now sees inflation rising to 5.3% this year, above the previous estimate of 4.2%. The central bank increased its PCE inflation estimate for 2022 to 2.6% from 2.2%. The Fed also raised the estimate for 2023 slightly.

Core PCE inflation expectations increased to 4.4% in 2021, up from September’s forecast of 3.7%. Core PCE for 2022 is now expected at 2.7% and for 2023 it is estimated to be 2.3%. These are up from September’s estimates of 2.3% and 2.2%, respectively.

The central bank now sees unemployment falling to 4.3% this year, lower than previous estimates of 4.8%.

The governing body also said it would accelerate the reduction of its monthly bond purchases on Wednesday. The Fed will buy $ 60 billion worth of bonds every month from January, half the level before the November downturn and $ 30 billion less than it had bought in December.

The central bank kept benchmark interest rates close to zero on Wednesday.

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