Headline inflation was forecast to average 7.1% this quarter, before falling to 2.3% by the end of next year, and average 5.0% and 2.5% in 20, respectively. The core personal consumption expenditure (PCE) price index, the Fed's preferred inflation gauge, was forecast to clock 3.9% and 2.4% this year and next, before falling to 2.1% in 2024. However, the probability and size of that increase shifted throughout March. The Fed’s last rate increase marked the 11th time the central bank has raised interest rates since 2022. Still, the Fed was not expected to achieve its 2% inflation target until at least 2024. Current benchmark interest rates are in a range of 4.5 to 4.75, with another hike expected. The Fed is expected to raise interest rates, despite recent banking turmoil: This will be a game-time decision Published Wed, 9:47 AM EDT Updated Wed, 1:52 PM EDT. "Since nobody knows where the neutral rate exactly is, the Fed could get into restrictive territory earlier than it realizes, and that could ultimately lead to a recession," said Philip Marey, senior U.S. That terminal rate was expected to be reached by end-2024, marking a quick tightening cycle by historical standards, something which comes with its own risks. The latest move set the Fed’s policy rate in a range of 1.50 percent to 1.75 percent, and more rate increases are to come. Respondents put both the terminal rate and their estimated neutral rate at the same level, 2.25% to 2.50%, according to median forecasts from additional questions. Not only was it expected to be short, but the Fed is only forecast to reach a neutral rate: one which neither stimulates nor puts the brakes on activity. Poll respondents also said this would not be a typical interest rate cycle. While that would leave the central bank's balance sheet about 30% lighter, it would still be larger than before the pandemic, roughly $4 trillion. Respondents estimated the Fed's balance sheet would amount to $5.5 trillion to $6.5 trillion once this so-called "quantitative tightening" concludes. In the upcoming Federal Open Market Committee meeting on June 13 and 14, experts think the Fed won’t raise or lower rates but rather. That follows a $120 billion-per-month purchase pace at the peak of pandemic-related stimulus. Most experts believe that Fed rate hikes may be over for now.
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