As was widely expected, the Federal Reserve paused on a further increase in the federal funds rate for June, keeping it in a target range of 5% to 5.25% after 10 consecutive increases. However, the Federal Open Market Committee’s projections released on Wednesday indicated that two more increases are coming and that rates could move as high as 5.6% by the end of 2023. 

“Holding the target range steady at this meeting allows the Committee to assess additional information and its implications for monetary policy,” according to the FOMC’s statement. However, the FOMC signaled that it could raise the rate again at its next meeting. 

“In determining the extent of additional policy firming that may be appropriate to return inflation to 2% over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments,” according to the statement. At the news conference following the announcement, Fed Chair Jerome Powell said the central bank has “a long way to go” before reaching that inflation target. 

Eighteen FOMC members indicated their expectations for rates in 2023 and further out in the so-called “dot plot” of projections. Four members saw one more rate increase this year, while nine are expecting two.  

Two more members added a third hike, while one saw an additional four. Only two members said they don’t anticipate any more increases this year. The Dow Jones Industrial Average declined nearly 300 points following the decision, driven lower by the projection of more rate increases. 

Committee members also hiked their forecasts for the next two years, now projecting a fed funds rate of 4.6% in 2024 and 3.4% in 2025, CNBC reported. That’s up from respective forecasts of 4.3% and 3.1%, previously.

Pictured: Fed Chair Jerome Powell at a May 2023 news conference.