We project price pressures to swing from inflationary to deflationary by 2023, owing greatly to the unwinding of price spikes caused by supply constraints in durables, energy, and other areas.

We do, however, expect interest rates to dip below these levels in 20 as monetary policy leans accommodative.Ģ) Inflation forecast. Further out, our 2026 and long-run projection for the fed-funds rate and 10-year Treasury yield are 1.75% and 2.75%, respectively. We project a year-end 2023 federal-funds rate of 4.75%, falling to 2% by the end of 2024. The Fed will pivot to monetary easing as inflation falls back to its 2% target and the need to shore up economic growth becomes a top concern.ġ) Interest-rate forecast. Then starting around the end of 2023, we expect the Fed to begin cutting the federal-funds rate. When Will Interest Rates Go Down?įirst, we expect the Fed to pause its rate hikes by summer 2023. In 2023, we expect the impact of rate hikes to be felt more strongly in other parts of the U.S.

We think that households’ excess savings and other factors are temporarily cushioning the hit from higher interest rates.

Housing activity has fallen sharply, but much of the rest of the economy seems unscathed. economy has proved more resilient to the impact of higher rates than expected.

One reason that interest rates have risen much further than most forecasters (including us) anticipated is that the U.S.

Fd turbulence