In the Fed’s latest projections, they expect inflation to drop by half in 2023. They expect to hold rates and possibly cut them in 2023.

PCE/Core PCE is the Fed's favored inflation metric. In the Fed's most recent Projection Materials, the Fed show they believe that PCE inflation will come down to 2.8% and Core PCE will come down to 3.1% in 2023. Their June 2023 projections show they expect inflation to be 2.6% for PCE and 2.7% for Core PCE. (Page 2 of their meeting presentation). PCE is currently at 6.2% and Core PCE is currently at 5.1%.

The Fed has already indicated it will start holding interest rates at 4.75-5%% next year (Page 4). As we are already at 4%, that means there are only a few rate hikes left before the Fed expects to start holding rates. On that same page, you can see that they expect interest rates to be lower to about 4% by 2024 so there could possibly be rate cuts in 2023.