The Federal Reserve kept its key lending rate unchanged Wednesday, but lifted the upper-end of its near-term rate forecast, suggesting the central bank still feels tighter financial conditions are needed to combat the current elevated levels of inflation.
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The Fed kept the Fed Funds on hold at between 5% to 5.25%, snapping a streak of 10 consecutive increases that lifted it to the highest since 2007 following its two-day policy meeting in Washington amid a easing in headline inflation pressures and moderating economic growth.
However, in the Fed's summary of economic projections, also known as the 'do plots', which indicate the prospective forecasts of voting and non-voting members of the Open Markets Committee, the median view of the Fed Funds rate by the end of this year was marked 0.5% higher, at 5.6%, compared to the March release.
That suggests the potential for at least two more rate hikes between now and December, the Fed's last policy meeting of the year.
"Holding the target range steady at this meeting allows the Committee to assess additional information and its implications for monetary policy," the Fed statement said. "In determining the extent of additional policy firming that may be appropriate to return inflation to 2% over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments."
U.S. stocks pared gains quickly following the Fed statement with the S&P 500 marked 27 points lower on the session while the Dow Jones Industrial Average falling 377 points. The tech-focused Nasdaq was marked 62 points lower.
Benchmark 10-year Treasury note yields were marked 6 basis points higher at 3.829% while 2-year notes gained 12 basis points to 4.754%. The U.S. dollar index, meanwhile, was marked 0.1% lower at 103.240 against a basket of six global currency peers.
CME Group's FedWatch now suggests a 60% chance that the Fed will lift rate by 25 basis points, to between 5.25% to 5.5% at its next policy meeting in July.