Fed may "rest" at 4.5%

Its most recent increase last month brought the benchmark federal-funds rate to a range between 3% and 3.25%. Officials last month penciled in additional rate rises that could lift the rate above 4.5% by early next year.

Earlier Monday, Chicago Fed President Charles Evans said under his current outlook for the economy, it would be appropriate for the central bank to pause rate increases at slightly more than 4.5% by next March and then to assess how the economy was reacting.

Investors expect the Fed to raise rates by 0.75 percentage point at their next meeting, Nov. 1-2. [end quote]

Fed’s dot plot signals policy rate topping 4% in 2022, peaking in 2023

Sep. 21, 2022 2:03 PM ETBy: Max Gottlich, SA News Editor

The central bank’s so-called dot plot is a closely watched summary of expectations for the future outlined by 19 members of the Fed’s Federal Open Market Committee.

For 2023, the majority of officials (12) now see the key rate reaching a level between 4.50% and 5%, while the most dovish prediction comes from one member expecting rates to top out at 3.75%-4%. In the following year, the dot plot shows a wide dispersion of rate forecasts ranging from 2.75% to 4.75%.

The Fed’s June estimate, by comparison, revealed most policymakers then believed the fed funds rate will reach at least 3.25% by year-end, followed by more rate hikes in 2023 and cuts in 2024. [end quote]

This is helpful for bond and stock investors. The markets will almost certainly move in anticipation, probably more so as the time approaches.