Before today’s Federal Reserve policymaking meeting, financial markets were pricing in three Fed rate hikes this year, including today’s 25 basis-point increase. Afterward, expectations for a fourth hike, which had been growing in part because of more hawkish comments from new Chairman Jerome Powell, got an additional lift.
It came from the Fed’s policy statement as well as the so-called dot plot, which illustrates the economic projections of its policymakers.
The latest dot plot projects higher average federal funds rates for 2018, but the median fell one vote short of four hikes in 2018. The dot plot also indicated three hikes, up from two, for 2019 and even higher rates by the end of 2020, topping the Fed’s 2% target for the first time.
Its median projection for GDP rose to 2.7% in 2018 and 2.4% in 2019, up from 2.5% and 2.1%, respectively from the Fed’s December projections. The median projection for unemployment fell to 3.8% in 2018 and 3.6% in 2019, down from 3.9% and 4.1%, respectively, at the last meeting.