Since March 2022, the Federal Reserve has approved nine consecutive interest rate hikes, with four of them being the biggest since 1994. This is the first time that the Fed has raised interest rates at that many meetings back-to-back since before the financial crisis. According to the Fed's most recent projections from March, the peak federal funds rate is expected to be between 5-5.25 percent, which would be the highest since 2006 and signal one more quarter-point hike.
Economists and investors expect the Fed's key benchmark interest rate to peak in a target range of 5-5.25 percent. Market participants also do not anticipate the Fed lifting above that target range. Federal Reserve Bank of Atlanta President Raphael Bostic projected one more rate hike and then a pause “for quite some time,” adding that one more move should be enough for the Fed to assess how their policy is flowing through the economy.
However, some policymakers project that rates might need to rise slightly higher to cool inflation. Three officials in the Fed’s March projections see rates rising to 5.25-5.5 percent, another three see 5.5-5.75 percent rates, while one lone official sees rates hitting 5.75-6 percent — the highest since 2001.
The banking turmoil in March has led the Fed to “lower their assessments of the federal funds rate target range,” judging that rates wouldn’t need to rise as high to weigh on demand. Some economists predict even higher rates, with nearly one-fifth expecting the Fed to hike interest rates to 5.25-5.5 percent, while nearly 12 percent say the Fed won’t stop until rates hit 5.5-5.75 percent.
Disagreements may arise on both sides, raising the likelihood of dissent. St. Louis Fed President Jim Bullard supports raising interest rates to a 5.5-5.75 percent target range, while Chicago Fed President Austin Goolsbee called for prudence and patience in assessing the potential impact of financial stress on the real economy. The Fed may not provide anything definitive until later.
