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The Fed raises interest rates strongly again, sees another important increase this year

By Howard Schneider and Ann Saphir

WASHINGTON, Sept 21 (Reuters) – The U.S. Federal Reserve on Wednesday raised its target interest rate by three-quarters of a percentage point, to a range of 3.00%-3.25%, and new projections indicate that Borrowing costs will advance to 4.40% by the end of the year before eventually peaking at 4.60% in 2023.

Meanwhile, the central bank’s quarterly projections estimate a slowdown in GDP growth to 0.2% this year to recover to a 1.2% expansion in 2023, well below potential output.

In addition, the entity expects the unemployment rate to rise to 3.8% this year and stand at 4.4% in 2023. Inflation, on the other hand, will slowly return to the Fed’s 2% target in 2025.

No interest rate cuts are anticipated until 2024.

The projected fed funds rate for the end of this year indicates cost of credit increases by another 1.25 percentage points in the Fed’s remaining two policy meetings through 2022, a level that implies another 75 basis point increase to the view

“The committee is strongly committed to returning inflation to its 2% target,” the Federal Open Market Committee (FOMC) said in a statement announcing its third consecutive rise of 75 basis points, above increases in a quarter of a percentage point typical of monetary tightening cycles in the United States.

The Fed “anticipates that current increases in the target range of the fed funds rate will be appropriate,” the panel said, reiterating its position from its previous statement in July. The updated projection points to a protracted battle by the Fed to quell the highest inflation since the 1980s, and one that could possibly push the economy to at least the brink of a recession.

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(Edited in Spanish by Marion Giraldo)

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