Markets expect the U.S. Federal Reserve to raise rates again on March 22. The increase is expected to be 0.25 percentage points, with a slim chance of a 0.5 percentage point hike. However, the question for markets is what will happen in the two meetings after March. The markets see a good chance that the Fed will also raise on 3 May and possibly on 14 June too.
Summary Of Economic Projections
A key piece of information from the March meeting will be the Fed’s Summary of Economic Projections. Here the members of the Fed’s decision-making committee publish their estimates for where rates will be at the end of 2023. This data is only published at every other meeting and the most recent estimates from the Fed are from December 14, 2022. Those are now a little dated given the economic data that has been reported in recent months including some encouraging updates on inflation and the jobs market.
In the December estimates the Fed expected rates to end 2023 in a 4.75% to 5.75% range with most policy makers seeing rates between 5% and 5.5%. Data the Fed will share in March will update that. Major changes are not expected, in fact the markets are reasonably aligned with the Fed’s December projections currently.
However, updated forecasts may help finesse the Fed’s view on what to expect from the May and June meetings. Currently, the market views the May meeting as probable to result in a rate increase with the June meeting more of a toss-up. After June rates may hold steady for the remainder of 2023, with some small chance of a cut toward the end of the year on current expectations.