The Fed now expects rates to end in a range of 5% to 5.25% in 2023, up from the 4.5% to 4.75% it estimated in September, according to the median forecast of policymakers. It expects to cut rates to 4.1% by the end of 2024 to support an economy that could be weakened by rate hikes, up from the 3.9% it forecast in September.
Many economists forecast a mild recession next year, according to a survey this month by Wolters Kluwer Blue Chip Economic Indicators.
Economists are not convinced that the Fed will need to raise rates as much as it has projected.
“We think the slowing economy and progress on inflation will allow the Fed to restrain that trajectory,” Oxford Economics economist Nancy Vanden Houten wrote in a note to clients.
On Wednesday, the Fed said it expects the economy to grow 0.5% this year, more than previously estimated, and at the same weak pace in 2023, below its September forecast of 1.2%, according to officials’ average estimate.
It expects the unemployment rate to rise from 3.7 percent to 4.6 percent by the end of next year, up from an earlier estimate of 4.6 percent.