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Fed projects rate increases starting in 2023.

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Federal Reserve officials on Wednesday moved up their expectations for when they will first raise interest rates from rock-bottom, a sign that a healing labor market and rising inflation are giving policymakers confidence that they will achieve their full employment and stable price goals in coming years.

Fed policymakers now expect to make two interest rate increases by the end of 2023, the central bank’s updated Summary of Economic Projections showed Wednesday. Previously, the median official had anticipated that rates would stay at rock bottom — where they have been since March 2020 — at least into 2024.

Jerome H. Powell, the Fed’s chair, will offer prepared remarks and take reporter questions during a webcast news conference scheduled to begin at 2:30 p.m.

“Progress on vaccinations has reduced the spread of Covid-19 in the United States,” the Fed said in a statement released at the conclusion of its June 15-16 policy meeting, one that took several optimistic revisions. “Progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy, but risks to the economic outlook remain.”

Economic data have offered a series of surprises since the Fed met in late April, and since it last released economic projections in March. Inflation data have come in faster than officials had expected, and consumer and market expectations for future inflation have climbed. Employers have been hiring more slowly than they were earlier this spring, as job openings abound but it takes workers time to flow into them.

The Fed continued to call that inflation increase largely “transitory” in its new statement. It has consistently pledged to take a patient approach to monetary policy as the economic backdrop rapidly shifts.

Its main policy interest rate, the federal funds rate, has been set at near-zero since March 2020, helping to keep borrowing cheap for households and businesses. The Fed is also buying $120 billion in government-backed bonds each month, which keeps longer-term borrowing costs low and can boost stock and other asset prices. Those policies work together to keep money flowing easily through the economy, fueling stronger demand that can help to speed up growth and job market healing.


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