The Federal Reserve kept its benchmark interest rate unchanged and may raise it twice by the end of 2023, with overall inflation expectations raised to 3.4%.

At 2:00 p.m. on June 16, Eastern Time, the Federal Open Market Committee (FOMC) announced its interest rate decision, policy statement, and quarterly economic projections (SEP), followed by a press conference by Fed Chairman Powell. The Fed maintained the benchmark interest rate at 0-0.25% and the $120 billion bond purchase plan, but did not explicitly discuss exiting QE.

The Federal Reserve said on Wednesday it would keep its benchmark interest rate unchanged at near zero and still plans to continue buying $80 billion in U.S. Treasuries and $40 billion in mortgage-backed securities (MBS) each month. But it signaled it expects to raise rates twice by the end of 2023, having previously said in March that it would not raise rates until at least 2024.

In addition, although the Fed raised its overall inflation forecast to 3.4%, a full percentage point higher than the March forecast, the post-meeting statement continued to say that inflationary pressures are "transitory." Fed officials raised their GDP forecast for this year to 7% from the previous 6.5%, and the unemployment rate estimate remained unchanged at 4.5%.

Powell said that he does not rule out the possibility that inflation will last longer than expected and contribute to rising expectations. If we see inflation expectations rising, contrary to our base case, we will take action to reduce inflation.

According to the Federal Reserve FOMC economic forecast, the median core PCE inflation forecast for 2021, 2022 and 2023 is 3.0%, 2.1% and 2.1% respectively. The forecasts in March were 2.2%, 2.0% and 2.1% respectively.

Powell said policy will continue to provide strong support to the economy. Inflation is likely to remain high for several months before easing. Inflation may be higher and more persistent than we expect.

If inflation expectations are too high, the Fed will be prepared to adjust its policy. Many participants predicted that the conditions for raising interest rates will be met sooner than expected. The Fed's goal is to keep inflation above 2% for some time. Even after raising interest rates, policy will remain highly accommodative.

According to the Federal Reserve FOMC statement, the goal is to achieve full employment and an inflation rate of 2% over a longer period of time.

The Federal Reserve's FOMC June dot plot showed that 13 members expected the Fed to start raising interest rates in 2023, and 7 members expected it to start raising interest rates in 2022.

Powell said that there is no discussion about whether it is appropriate to raise interest rates in a specific year, and it is too early to discuss raising interest rates. The interest rate hike will happen after a long time; we are still far from the maximum employment goal.

According to the Federal Reserve FOMC economic forecast, the median forecast for GDP growth at the end of 2022 is 3.3%, which is 3.3% in March. The median forecast for GDP growth at the end of 2023 is 2.4%, which is 2.2% in March.

The Fed's dot plot shows that the Fed will raise interest rates twice by the end of 2023. The Fed kept the benchmark interest rate unchanged at 0%-0.25%, in line with market expectations.