Watch Jerome Powell’s news conference after the latest market-moving Fed rate hike

The Fed’s rate projections show no rate cuts in 2023, which stands in contrast to some market expectations prior to today’s data release.

Fed Chair Jerome Powell said the central bank would need to be confident in the path of inflation before looking at cutting its benchmark interest rate.

“Historical experience cautions strongly against prematurely loosening policy. I wouldn’t see us considering rate cuts until the committee is confident that inflation is moving down to 2% in a sustained way,” Powell said.

— Jesse Pound

Though financial conditions have tightened “significantly” in the past year, Federal Reserve policy isn’t “sufficiently restrictive” yet, Powell said.

“I would say it’s our judgment today that we’re not in a sufficiently restrictive policy stance yet, which is why we say that we would expect that ongoing hikes will be appropriate,” he said. “I would point you to the SEP again for our current assessment of what that peak level will be.”

The SEP, or Summary of Economic Projections, represents the projections of the FOMC participants for four key economic indicators and the Federal Funds Rate. Powell said 17 of the 19 people that filled out the SEP write down a peak rate of 5% or more.

— Tanaya Macheel

More aggressive Fed rate hikes will lessen the likelihood of a soft landing scenario for the economy, according to Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.

The Fed’s statement, he said, indicates that the central bank will head into “even more restrictive territory” than initially expected.

“The economy isn’t in recession yet, but as long as the Fed is aggressively raising interest rates it’s going to be hard for it to retain its resilience and the chances of a soft landing will go down proportionately with the Fed’s willingness to let up on rate hikes,” he said.

— Samantha Subin

Fed Chair Jerome Powell said sticky services inflation might cause the central bank to continue raising rates.

“There’s an expectation really that the that the services inflation will not move down so quickly so that we’ll have to stay at it,” Powell said during a press conference. “So we may have to raise rates higher to get to where we want to go and that’s really why we’re writing down those high rates and why we’re expecting that they will have to remain high for a time.”

The Fed’s median projections showed that it will hike rates as high as 5.1% in 2023. The forecast is higher than the 4.6% projected by the Fed in September.

— Yun Li

After the Fed downshifted to a 50-basis point hike this month, Jerome Powell did not signal if the central bank would maintain or slow down that pace at its next meeting.

“It’s now not so important how fast we go. It’s far more important what is the ultimate level, and at a certain point the question will become how long do we remain restrictive. … But I would say the most important question now is no longer the speed, and that applies to February as well,” Powell said.

“I think we’ll make the February decision based on the incoming data,” he added.

— Jesse Pound

While many investors believe inflation has peaked and will decline in 2023, the Fed is still taking a cautious stance, Jerome Powell said.

“Participants continue to see risks to inflation as weighted to the upside,” Powell said.

The central bank chief also stressed the importance of keeping inflation expectations low.

— Jesse Pound

Treasury yields moved higher after the Fed’s 2 p.m. rate hike and new economic and interest rate forecasts, as investors viewed the Fed as hawkishly positioned.

Yields move opposite price. The benchmark 10-year yield moved higher to 3.53%.

According to Jim Caron of Morgan Stanley Investment Management, the big issue that makes the Fed’s forecast hawkish is that central bank officials now sees their rate hikes stopping at a higher level of about 5.1%, versus its forecast of 4.6% at the September meeting.

Strategists also noted the Fed did not mention the better than expected consumer inflation report for November. CPI was up 7.1% on an annual basis, below expectations and well below the 7.7% in October.

Fed Chairman Jerome Powell, in his remarks, did give a nod to the inflation report. While he said there was a welcome reduction in the pace of inflation, he said the Fed needs substantially more evidence that inflation is being tamed.

 “The fact that there was no text in the statement on the recent declines in inflation, the Fed is acknowledging inflation is much too elevated and they still have a hawkish stance,” said Mark Cabana of Bank of America.

–Patti Domm

Federal Reserve Chairman Jerome Powell said Wednesday the recent positive signs for inflation aren’t enough for the central bank to ease back on interest rate increases.

“It will take substantially more evidence to have confidence that inflation is on a sustained downward” path, Powell said during his post-meeting news conference.

The comments came as the Fed raised its benchmark rate another half percentage point and indicated at least another three-quarters of a point in hikes are coming. The decision also occurs a day after November’s consumer price index reading was up just 0.1%, an indication that inflation may have peaked.

However, Powell said inflation remains a problem.

“Price pressures remain evident across a broad range of goods and services,” Powell added.

—Jeff Cox

The updated Fed projections should be seen as a signal that the Fed will maintain high rates for an extended period of time rather than an accurate projection of where they may stop, according to Peter Boockvar, chief investment officer for Bleakley Financial Group.

“Bottom line, we’re now splitting hairs here on whether the fed funds rate ends up at 5-5.25% or 4.5-4.75% as previously forecasted, especially after such a dramatic rise already. Most importantly, we should be acknowledging that interest rates are going to stay high for longer and a continued adjustment that the economy and markets have to deal with,” Boockvar said in a note.

Fed officials have continually revised their expectations for future inflation and rate hikes upward over the past year.

— Jesse Pound

“So far it’s hawkish,” said John Briggs of NatWest Markets. Besides boosting the terminal rate forecast above 5%, just two Fed officials in their forecast were below 5%. “That’s a hawkish surprise. It’s not like it’s a disperse group. I think we’re seeing a delayed reaction. We need to see how Powell characterizes it.” He also said the increase in the forecast for core PCE — the central bank’s preferred inflation measure — was a surprise.

— Patti Domm

The latest policy statement from the Federal Open Market Committee is little changed from the November edition.

Notably, the central bankers left in language that “the Committee anticipates that ongoing increases in the target range will be appropriate.” This could be viewed as a hawkish sign by traders.

Check out the full comparison of the statements here.

— Jesse Pound

The Federal Reserve indicated Wednesday it sees the so-called terminal rate — or the high water mark for the fed funds rate — at 5.1%. At that point, officials are likely to pause to allow the impact of the monetary policy tightening make its way through the economy.

The consensus then pointed to a full percentage point worth of rate cuts in 2024, taking the funds rate to 4.1% by the end of that year. That is followed by another percentage point of cuts in 2025 to a rate of 3.1%, before the benchmark settles into a longer-run neutral level of 2.5%.

— Jeff Cox

U.S. stocks traded higher ahead of the Fed’s latest policy announcement. The Dow Jones Industrial Average was up 227 points, or 0.7%. The S&P 500 and Nasdaq Composite also popped 0.7%.

For more on how the stock market is trading, check out our live markets coverage.

— Fred Imbert

The inflation and Federal Reserve rate hike tide appears to finally be turning, meaning some investors may want to reevaluate some of the strategies that worked in 2022.

The surprisingly cool consumer price index report led to a pullback in yields Tuesday. And while the Federal Reserve is expected to hike rates by half a percentage point on Wednesday, traders will be looking for clues about whether the central bank will pause its hikes next year.

That could put pressure on a group of ETFs designed to counter inflation or rising rates — or both — that has attracted significant investor interest this year. 

Check out our full list on CNBC Pro.

— Jesse Pound

The Fed has to walk a fine line, as it tries to slow down its pace of rate hikes while signaling the fight against inflation is still far from over.

“I don’t think they can claim any victories on inflation yet. I think they are going to be very, very careful before they can do that,” said Aneta Markowska, chief financial economist at Jefferies. Earlier this year, she said it had seemed inflation was peaking. “It looked like it was over, and it came roaring back.”

— Patti Domm

The Federal Reserve is slated to deliver its final policy decision of 2022 in less than an hour.

The central bank is widely expected to raise rates by 50 basis points, or half a percentage point, after four straight 75 basis-point hikes. Chair Jerome Powell is also slated to hold a news conference after the Fed’s announcement, and investors will look for clues on what the central bank will do next — especially after the latest consumer price index report showed signs of inflation slowing.

Additionally, the Fed is set to release it latest “dot plot,” which shows where central bank officials expect rates to be over the next few years. Investors will comb through that data to gauge where the so-called terminal rate — the high water mark for rates — will be.

— Fred Imbert, Jeff Cox