The Federal Reserve made no change in the target range for its benchmark interest rate on Wednesday but suggested changes are coming later this year.

The fed funds rate was kept unchanged in a range of 5%-5.25% on Wednesday, the Fed's first pause in over a year as the central bank works to quell inflation. Along with its policy announcement, the Fed also released updated economic forecasts in its Summary of Economic Projections (SEP), including its "dot plot," which maps out policymakers' expectations for where interest rates could be headed in the future.

And the latest dot plot suggests rates will continue to tick higher in 2023.

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Fed officials now see the fed funds rate peaking at 5.6% this year, higher than the Fed's previous March projection of 5.1%.

This suggests the Fed will likely raise rates by 0.25% two more times this year (or raise rates by 0.50% in one shot).

Three officials see at least 0.75% worth of additional tightening this year. No officials expect to see rate cuts this year.

Fed officials now see interest rates coming down to 4.6% in 2024, higher than March's outlook for rates to finish next year at 4.3%. This month's expectations for rates next year were also less widely distributed compared to March's projections.

The SEP indicated the Federal Reserve sees core inflation peaking at 3.9% this year — higher than March's projection of 3.6% — before cooling to 2.6% next year and 2.2% in 2025.

Officials see unemployment rising to 4.1% this year, well below the previous 4.5% forecast. Unemployment is expected to tick slightly higher to 4.5% next year and remain at that level through 2025.

The Fed also sees slightly stronger economic growth, with the economy forecast to grow 1% this year — up from March's 0.4% projection — before picking up slightly to 1.1% in 2024 and 1.8% in 2025.

Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at [email protected]

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