Most Fed officials predict at least 7 rate hikes in 2022

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The Federal Reserve's outlook on interest rates has grown significantly more hawkish since late 2021, with more than half of top central bank officials predicting at least seven quarter-point rate hikes in 2022.

The forecast comes from the Fed's so-called dot-plot, a summary of the central bank's expectations for the future, which was released Wednesday. The dot-plot outlines the projections held by the 18 members of the Federal Open Market Committee, the central bank's rate-setting body.

Surveying the FOMC's 18 members, the dot-plot showed that 12 Fed officials predicted at least seven total rate hikes in 2022. On the high end, one Fed official expects the central bank to raise rates above 3% during the year, from the level around 0.25% currently in force.

The dot-plot came out along with the latest Fed decision, which raised interest rates by a quarter percentage point, its first hike since 2018.

The previous update on economic projections, which came out in December, indicated that all members saw rate hikes coming in 2022, with 12 expecting at least three quarter-point rate hikes during the year. The December dot-plot also showed two members projecting four rate hikes during the year.

The Fed's recent hawkish turn represents a massive reversal from its outlook as recently as the middle of last year. As of June 2021, less than half of the Fed officials surveyed thought any rate hikes would occur in 2022. At that time, five members didn't think the central bank would need to increase rates until after the end of 2023.

However, since that time, inflation has skyrocketed and proven itself to be more persistent than policymakers had expected. The latest read for consumer prices showed a 7.9% increase from last year -- the highest rate of inflation in 40 years.

In this environment, leading policymakers have shifted their focus away from pandemic-related stimulus and to a stance better suited to taming inflation. This included Federal Reserve Chairman Jerome Powell, who has called controlling price increases "the single most important thing we can do" to support long-term economic growth.

Meanwhile, some Fed members have pushed for an even more aggressive approach. For example, St. Louis Fed President James Bullard has said that he wanted the central bank to enact a half-point rate hike at the meeting that just finished. He added that he wanted the Fed's key rate to reach 1% (coming off a level near zero) by July 1.

Bullard followed through on this desire by dissenting from the rate-hike announcement released Wednesday, saying he wanted a half-point increase.

You can see the Fed's dot-plot here: