The Labor Department also reported the consumer price index was up 3.2% year-over-year in July, below the 3.3% increase economists were expecting. The core PCE inflation number excludes volatile energy and food prices. In late August, the Commerce Department reported the core PCE price index was up 4.2% year-over-year in July, a slight increase from the 4.1% gain reported in June. Unfortunately, the Fed still has a long way to go to bring inflation levels back in line with its long-term target of 2%. Investors will be paying close attention to how high the FOMC now sees interest rates rising in 2023 and how low committee members believe rates could fall in 2024 once the Fed eventually pivots to interest rate cuts. In June, 12 of the 18 FOMC members projected the upper end of the federal funds rate target range would reach at least 5.75% in 2023, but those expectations have likely changed in recent months.

The Fed also raised its 2023 growth forecast for the core personal consumption expenditures price index, its preferred measure of inflation, from 3.6% to 3.9%. GDP growth of 1%, an unemployment rate of 4.1% and a terminal fed funds rate of 5.6%. The Fed’s last economic projections in June called for 2023 U.S. economic growth projections, which include forecasts for GDP growth, unemployment rates, interest rates and inflation. The FOMC will also update its long-term U.S. The Fed’s balance sheet has dropped from a record high of $8.9 trillion in May 2022 to around $8.1 trillion in September, but it remains nearly twice its pre-pandemic size of $4.1 trillion in late February 2020. The central bank will continue to allow up to $60 billion in Treasury securities and $35 billion in agency mortgage-backed securities (MBS) to mature and roll off its balance sheet per month. Investors see a 93% chance the Fed will maintain interest rates at their current levels in September and only a 7% chance it will raise rates by a quarter of a percentage point, according to CME Group.Īt its previous meeting in July, the FOMC raised rates by 25 bps, its eleventh rate hike since March 2022.Ĭurrently investors see a 47% chance the central bank will raise rates by at least another quarter of a percentage point at the November FOMC meeting.

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