WASHINGTON — Federal Reserve officials signaled they expect to raise interest rates by late 2023, as the economy recovers rapidly from the effects of the pandemic and inflation heats up.
Their median projection showed they see lifting their benchmark rate to 0.6% from near zero by the end of 2023. In March they had expected to hold it steady through that year.
Fed officials also discussed an eventual reduction, or tapering, of the central bank’s bond-buying program, Chairman Jerome Powell said in a press conference Wednesday after the central bank’s two-day policy meeting. The timing of such a move remains uncertain, he added.
Last week, stocks and bonds fell after a statement from the Fed and Mr. Powell’s press conference. The Dow Jones Industrial Average closed 0.8% lower and the 10-year Treasury yield rose to 1.569%, from 1.498% on Tuesday. Bond yields went up as prices fell.
The Fed’s change in tone and new forecasts were “a wake-up call to the market” about the central bank’s likely response to higher inflation, said Phil Orlando, chief equity-market strategist at investment manager Federated Hermes Inc.
Market’s opened higher on Monday on bullish expectations after digesting the information, and expected oil prices that are projected to eventually hit $100 per barrel.
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