The Federal Open Market Committee raised the federal funds rate by 75 basis points today. It's the third consecutive 75-point increase.

The FOMC's statement on its decision says:

Recent indicators point to modest growth in spending and production. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures.

But their projections suggest that FOMC members remain concerned. The unemployment rate in the most recent jobs report was 3.7 percent. FOMC members predict that this will rise to 4.4 percent in 2023 and stay there for 2024. They believe that this will coincide with personal-consumption-expenditure (PCE) inflation falling from 5.8 percent this year to 2.6 percent next year and to 2.2 percent in 2024. (PCE inflation is the Fed's preferred measure, and it is lower than the Consumer Price Index due to methodological differences.) At the same time, however, they project real GDP growth of 0.2 percent this year, 1.2 percent next year, and 1.7 percent in 2024.

Put otherwise, they expect that the Fed's rate hikes will succeed in quelling inflation – necessarily by reducing demand. Consequently, they think, this will result in higher unemployment (which is consistent with macroeconomic theory). But how will falling demand and higher unemployment coincide with economic growth?

And yet this peachy picture is less optimistic than the previous projections from the FOMC, made during its last meeting in June. Members then predicted unemployment at 3.9 percent in 2023 and 4.1 percent in 2024, and they put real GDP growth at 1.7 percent in 2023 and 1.9 percent in 2024. That suggests that they think they had underestimated the economic damage their policies will cause in the service of quelling inflation.

They probably still underestimate it. The FOMC statement continues to include boilerplate language about the war in Ukraine:

Russia's war against Ukraine is causing tremendous human and economic hardship. The war and related events are creating additional upward pressure on inflation and are weighing on global economic activity. The Committee is highly attentive to inflation risks.

No doubt this is true, but the Fed cannot end the war. Assuming the war continues, so will the price pressures. Nonetheless, the Fed insists that it has all the tools it needs to bring inflation back to 2 percent, repeating the same inconsistent reasoning it has used for some time now.

Meanwhile, nominal spending continues to be above-trend. The elected parts of government are spending recklessly, and fiscal policy is working against monetary policy. Under these circumstances, the Fed will need to continue to raise rates.

Thus the major difference between the FOMC's June projections and the ones it released today: In June, members thought the federal-funds rate would be 3.8 percent next year and 3.4 percent in 2024. Today, they think it will need to be 4.6 percent next year and 3.9 percent in 2024, which means accelerating increases through next year with the hope of beginning to cut in 2024.

Dominic Pino is the Thomas L. Rhodes Fellow at National Review Institute.