US Fed lowers economic growth forecast, raises terminal rate above 4%

ANKARA

The Federal Reserve lowered its US economic growth forecast and raised its terminal rate above 4% for 2022 and 2023, according to projections materials released Wednesday.

The central bank expects the American economy to grow 0.2% this year, down from its previous forecast of 1.7% growth made in June.

The growth estimate for 2023 was also lowered to 1.2%, down from a projection of 1.7%.

The terminal rate, the peak spot where the federal funds rate is expected to climb before they are trimmed, was raised to 4.4% for 2022, from an estimate in June of 3.4%.

That rate is projected at 4.6% for 2023, up from 3.8%.

The personal consumption expenditures (PCE) price index, the central bank's preferred inflation indicator, is expected to come in at 5.4% in 2022, up from 5.2% in June.

Core PCE inflation was also revised up to 4.5% for this year, from the 4.3% forecast made three months ago.

The unemployment rate is estimated to climb to 3.8% in 2022, up from an expectation of 3.7% in June, according to the forecasts.

The new projections came as the Fed raised its benchmark interest rate by 75 basis points for the third straight time, carrying the federal funds rate to the 3% -3.25% range.

Consumer inflation showed an annual increase of 8.3% in August, above the 8.1% market estimate, while it peaked at 9.1% in June.