Federal Reserve Raises Rates by Half a Percentage Point
After four consecutive three-quarter point increases, the Federal Reserve raised the benchmark interest rate by half of a percentage point at its December meeting.
As expected, the rate-setting Federal Open Market Committee (FOMC) raised the fed funds rate, the amount that banks charge each other for overnight loans, to a targeted range of 4.25%-4.5%. The rate is now the highest it has been in 15 years.
Fed officials signaled they expect to keep rates higher through 2023. The FOMC’s dot plot of individual members’ expectations indicated the terminal rate, or point where officials expect to end rate increases, would be 5.1%. The officials then indicated they expect to cut rates to 4.1% by the end of 2024, followed by another percentage point of cuts in 2025 down to 3.1%.
The meeting’s policy statement was virtually unchanged from November’s meeting and was unanimously approved by FOMC members.