Federal Reserve Chairman Jerome Powell said Wednesday that markets should not yet ready themselves for a rate hike, downplaying the central bank’s projections on the possibility of a rate hike in 2022 or 2023.

In the Federal Open Market Committee’s policy-setting meeting this week, Fed officials brightened their forecasts for the economic recovery. In forecasts released Wednesday, the median member of the FOMC expects U.S. real GDP to grow 6.5% in 2021, with the unemployment rate falling to 4.5% by year’s end.

With trillions in stimulus spending since the Fed’s last set of projections in December, the number of FOMC members penciling in at least one rate hike by the end of 2023 grew from five to seven. Four of the committee’s 18 members now see a liftoff from near-zero rates as early as 2022.

Powell discouraged Fed watchers from reading too much into those forecasts.

“The state of the economy in two or three years is highly uncertain and I wouldn’t want to focus too much on the exact timing of a potential rate increase that far into the future,” Powell told reporters Wednesday afternoon.

The Fed maintained interest rates at near-zero on Wednesday and maintained its commitment to purchase at least $120 billion in U.S. Treasuries and agency mortgage-backed securities each month.

The median member of the committee still sees no rate hikes through the end of 2023, which falls in line with Powell’s insistence that the central bank remains a “long way” from its dual mandate goals of maximum employment and inflation.

Employment a larger concern than inflation

Improved optimism over the economic outlook also bled into expectations for inflation. In the Fed’s updated economic forecasts, the central bank now sees core personal consumption expenditures (the Fed’s preferred measure of inflation) reaching 2.2% year-over-year in 2021.

Fed officials have signaled in recent months that a rate hike would not be up for discussion until core PCE hits its 2% target, with a rate hike coming only after inflation “moderately” overshoots that target.

Powell insisted Wednesday that the 2.2% figure reached this year would likely be due to “transitory” factors and would therefore not immediately meet the standard for the Fed to begin raising rates.

The Fed chief clarified that employment is the major reason for why the Fed wants to maintain its “patiently accommodative stance." As of February, employment levels remain 9.5 million jobs below pre-pandemic levels.

“It’s just a lot of people who need to get back to work and it's not going to happen overnight,” Powell said Wednesday. “It's going to take some time no matter how well the economy performs.”

The Fed projections point to a strong likelihood of the U.S. economy getting back to its pre-pandemic unemployment rate of 3.5%, but not until the end of 2023.

Until then, Powell pledged to “continue to provide the economy the support that it needs for as long as it takes.”

The next FOMC meeting is scheduled for April 27 and 28.

Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.

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