US Fed expects another rate hike in 2023 as it keeps terminal rate unchanged

ISTANBUL

US Federal Reserve expects another rate hike this year as the central bank kept its terminal rate estimate unchanged at 5.1%, according to projections materials released Wednesday.

The terminal rate, the peak spot where the federal funds rate is expected to climb before being trimmed, was kept steady for 2023, compared to the Fed's projections in December.

The new projections came as the Fed raised its benchmark interest rate by 25 basis points, carrying the federal funds rate to the range between 4.75% to 5% despite the recent US banking crisis

The central bank expects the American economy to grow 0.4% in 2023, down from a previous forecast of 0.5% in December.

The personal consumption expenditures (PCE) price index, the central bank's preferred inflation indicator, however, was raised to 3.3% for the year, up from 3.1% in December.

Core PCE inflation was revised up to 3.6% for 2023, from the 3.5% forecast made three months ago.

The unemployment rate is estimated to ease slightly to 4.5% in 2023, down from an expectation of 4.6% in December, according to forecasts.