The Federal Reserve left the federal funds rate unchanged at 5% to 5.25% following the conclusion of Wednesday's Federal Open Market Committee meeting. However, the FOMC stated it was prepared to adjust its policy if risks presented themselves.
The market places a nearly 72% probability that the Fed will tighten interest rates by a quarter of a percentage point at its July meeting, based on CME Group's FedWatch Tool based on futures pricing.
The probability of a July rate change has shifted over the past month. In mid-May, traders placed about a 61% probability that the fed funds rate would remain at 5% to 5.25%. A week ago, that dropped to about 30%, and it currently stands at roughly 28%.
The Fed has increased its interest-rate projection for 2023 through 2025. It now expects the fed funds rate to reach 5.6% this year, up 50 basis points from the central bank's March estimate. For 2024 and 2025, the Fed anticipates 4.6% and 3.4% rates, respectively, each 30 basis points higher than its previous projection.
The Fed forecasts the Core Price Consumption Expenditures Price index will increase by 3.9% this year, up from its March 3.6% projection. It expects a 3.2% increase in the PCE Price index this year, virtually unchanged from the 3.3% expectation it provided three months ago.
