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The Fed: Fed sees no rate hikes through 2023 despite some inflation overshoot

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The Federal Reserve on Wednesday remained in a holding pattern, saying it didn’t think it would raise interest rates until the end of 2023 despite signs of stronger economic growth and higher inflation,

In its forecasts, the Fed marked up GDP growth this year to a 6.5% annual rate and said core inflation would rise slightly above the central bank’s 2% target.

There was some indication that Fed officials think the easy policy stance might not last for years.

Seven of 18 Fed officials have penciled in a rate hike in 2023, up from 5 at the last “dot-plot” in December. Four officials expect a rate hike in 2022, up from one member in the December forecast.

In a policy statement released after the two-day policy-meeting, the Fed noted that areas of the economy hurt by the pandemic are still struggling.

 “Following a moderation in the pace of the recovery, indicators of economic activity and employment have turned up recently, although the sectors most adversely affected by the pandemic remain weak,” the Fed said.

Fed Chairman Jerome Powell will hold a press conference at 2:30 pm.

The Fed projections see inflation slowing to 2% in 2022 before picking up slightly to 2.1% in 2023. The central bank has said it will tolerate inflation slightly above target to make up for the years inflation has been below 2%.

Follow: Fed faces communications challenge: live blog of Powell press conference

The Fed, as expected, kept interest rates close to zero and said it would continue to purchase $120 billion per month of Treasurys and mortgage-related assets.

Stocks
DJIA,
+0.52%

moved higher after the Fed’s decision was announced.

The yield on the 10-year Treasury note
TMUBMUSD10Y,
1.655%

fell after the Fed announcement. Earlier on Wednesday the yield rose to the highest levels seen since the pandemic struck one year ago earlier on Wednesday.

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