Market perspectives

With inflation still too high and the labor market still tight, we expect Federal Reserve policymakers to raise their target for short-term interest rates once more next month. In a change to our forecast, we expect that hike to be the last in a series that so far spans 10 meetings and 5 percentage points. We now see the Fed’s terminal rate in a range of 5.25%–5.5%, just a quarter of a percentage point higher than the current rate target. We also have raised our year-end inflation forecast and modified our labor market forecast.