The Federal Reserve raised interest rates by 0.5% on Wednesday, and said a slower pace of hikes ahead, but signaled that rates will have to move higher than previously projected as *inflation remains well above target*.
*The Federal Open Market Committee, the FOMC*, raised its benchmark rate to a range of 4.5% from 4% previously.
The move marked a slowdown from the 0.75% rate increases seen at the prior four meetings. This steep pace of rate hikes, the fastest since the 1980s, has begun to make a dent in inflation.
While the recent evidence pointing to slowing inflation has been encouraging, the Fed believes further hikes, though at a slower pace, are needed to ensure that *price pressures eventually drop to its 2% target*.
The Fed now sees its benchmark rate rising to a peak, or terminal rate, of 5.1% in 2023, above the 4.6% forecast in September, suggesting at least two 25 basis point rate hikes ahead.
That is slightly higher than market expectations for rates to peak at the high end of around 5%.
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