The Fed left the target for the fund’s rate unchanged at 5%-5.25%, as expected, but signaled rates may go to 5.6% by year-end if the economy and inflation do not slow down more. It marks the first pause in the tightening campaign following ten consecutive hikes that lifted borrowing costs to the highest level since September 2007. Policymakers said that holding the target range steady allows them to assess additional information and its implications for monetary policy, but noted they would be prepared to adjust it if risks emerge that could impede the attainment of their goals. The funds rate is now seen higher at 5.6% this year, compared to 5.1% projected in March. Upward revisions were also made for 2024 (4.6% vs 4.3%) and 2025 (3.4% vs 3.1%). The GDP is seen rising 1% this year, higher than the 0.4% seen in March, while growth for both 2024 (1.1% vs 1.2%) and 2025 (1.8% vs 1.9%) was revised lower. PCE inflation for this year is seen at 3.2%, below 3.3.% in the March projection.
