As expected, FOMC decided to keep rates unchanged with Fed funds staying in the 5.25-5.50% range. However, there were some changes to economic forecasts and those are driving hawkish reaction in the markets. GDP forecast for 2023 was boosted from 1.0% to 2.1% while growth in 2024 is seen reaching 1.5%, up from previous forecast of 1.1%. Headline PCE inflation is seen slightly higher this year while core inflation is seen slightly lower.
The most important part of forecasts - dot-plot - showed a hawkish revision. While the median rate forecast for end-2023 was left unchanged at 5.6%, forecast for end-2024 was boosted from 4.6% to 5.1%! This means that one more 25 bp rate hike is a median consensus for the remainder of 2023, followed by 50 basis points of cuts. According to dot-plot, 12 FOMC members support hiking rates one more time this year while 7 prefer them to be left at current levels. FOMC members are much more split over the next year with forecasts ranging from below 4.5% to above 6.0%.
Start investing today or test a free demo
Open account Try demo Download mobile app Download mobile appAs we have already said, reaction of the markets can be seen as hawkish and it should not come as a surprise given new forecasts. USD gained with EURUSD dropping around 0.5% following the decision. US500 moved dropped by around 20 points to a fresh daily low. Stronger USD puts some pressure on precious metals with GOLD dropping around $5 per ounce.
Attention now shifts to the press conference of Fed Chairman Powell, which is scheduled to begin at 7:30 pm BST.
![](https://xtb.scdn5.secure.raxcdn.com/postContentImage/0103/07/7901dedc-35b0-4773-b5dd-e3f322024f83/image-3.png)
Source: Federal Reserve
![](https://xtb.scdn5.secure.raxcdn.com/postContentImage/0103/07/0959fd03-b2b0-48da-b269-11de532f9534/image-2.png)
Source: Federal Reserve
This content has been created by XTB S.A. This service is provided by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. XTB S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.