FOMC Rate Hike "Expected," Says NAFCU Chief Economist

Curt Long

"The FOMC voted unanimously for a third consecutive 75-basis point increase to the target federal funds rate. This outcome was widely expected, but that does not detract from the breathtaking rise over the from under 1 percent in early June to over over 3 percent just three months later. With the move, Chairman Powell indicated that rates are now potentially in restrictive territory. That adds to the impression that the FOMC is not done raising rates by a long shot. Adding to that speculation, the Committee's updated projections have the fed funds rate rising by another 125 basis points to 4.4 percent by the end of 2022 and to 4.6 percent at the end of 2023.

​Beginning in 2024, projections vary widely, with the median member expecting 75 basis points of rate cuts that year and 100 basis points the next. The unemployment rate is expected to top out at 4.4 percent in 2023 and remain there the following year before declining somewhat in 2025. That outcome would either avoid a recession or constitute a very mild one, but the risks are all weighted to the downside. For it to be realized, the Fed would need to properly identify the turning point at which it can safely ease its foot off the brake and to do so with the proper weight. Credit unions should prepare for a mild recession in 2023, at minimum."

-NAFCU Chief Economist and Vice President of Research Curt Long

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