December 14, 2022
November 02, 2022
Jerome H. Powell
December 14, 2022 FOMC Statement
FOMC statement
Federal Reserve issues FOMC statement
For release at 2:00 p.m. EDT EST
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.
Russia's war against Ukraine is causing tremendous human and economic hardship. The war and related events are creating additional contributing to upward pressure on inflation and are weighing on global economic activity. The Committee is highly attentive to inflation risks.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 3-3/4 4-1/4 to 4 4-1/2 percent. The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time. In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in the Plans for Reducing the Size of the Federal Reserve's Balance Sheet that were issued in May. The Committee is strongly committed to returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Lael Brainard; James Bullard; Susan M. Collins; Lisa D. Cook; Esther L. George; Philip N. Jefferson; Loretta J. Mester; and Christopher J. Waller.
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Implementation Note issued November 2, December 14, 2022
Our summary
What changed
- Raised the federal funds rate target range from 3-3/4 to 4 percent to 4-1/4 to 4-1/2 percent.
- Changed language on the war's effects from 'creating additional upward pressure' to 'contributing to upward pressure' on inflation.
- All other policy language, including balance sheet reduction and forward guidance, remained unchanged.
- The vote was unanimous, with all 12 members voting for the action.
Implications
The shift from 'creating' to 'contributing' suggests a slightly less acute view of the war's inflationary impact, possibly indicating that other factors are playing a larger role.
The continued emphasis on 'ongoing increases' and the pace-determining factors signals that the FOMC still expects further rate hikes, but the pace will depend on incoming data.
Summary generated automatically from the statements. Not investment advice.
Projections
| 2022 | 2023 | 2024 | 2025 | Longer run | |
|---|---|---|---|---|---|
| Real GDP growth | 0.5 was 0.2 | 0.5 was 1.2 | 1.6 was 1.7 | 1.8 | 1.8 |
| Unemployment rate | 3.7 was 3.8 | 4.6 was 4.4 | 4.6 was 4.4 | 4.5 was 4.3 | 4.0 |
| PCE inflation | 5.6 was 5.4 | 3.1 was 2.8 | 2.5 was 2.3 | 2.1 was 2.0 | 2.0 |
| Core PCE inflation | 4.8 was 4.5 | 3.5 was 3.1 | 2.5 was 2.3 | 2.1 | |
| Federal funds rate | 4.4 | 5.1 was 4.6 | 4.1 was 3.9 | 3.1 was 2.9 | 2.5 |
Median projections of FOMC participants; previous: September.
Each dot is one participant's projection of the federal funds rate (%) at the end of each year and in the longer run.
December September median September median
Scroll the chart sideways for the later years.
Implementation Note
The settings that put the decision into effect: the interest rate paid on reserves, the FOMC's instructions to the New York Fed's trading desk, and the discount rate. Changes are marked the same way as in the statement.
- The Board of Governors of the Federal Reserve System voted unanimously to raise the interest rate paid on reserve balances to
3.94.4 percent, effectiveNovember 3,December 15, 2022. - As part of its policy decision, the Federal Open Market Committee voted to authorize and direct the Open Market Desk at the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the System Open Market Account in accordance with the following domestic policy directive: "Effective
November 3,December 15, 2022, the Federal Open Market Committee directs the Desk to: - Undertake open market operations as necessary to maintain the federal funds rate in a target range of
3-3/44-1/4 to44-1/2 percent. - Conduct overnight repurchase agreement operations with a minimum bid rate of
44.5 percent and with an aggregate operation limit of $500 billion; the aggregate operation limit can be temporarily increased at the discretion of the Chair. - Conduct overnight reverse repurchase agreement operations at an offering rate of
3.84.3 percent and with a per-counterparty limit of $160 billion per day; the per-counterparty limit can be temporarily increased at the discretion of the Chair. - Roll over at auction the amount of principal payments from the Federal Reserve's holdings of Treasury securities maturing in each calendar month that exceeds a cap of $60 billion per month. Redeem Treasury coupon securities up to this monthly cap and Treasury bills to the extent that coupon principal payments are less than the monthly cap.
- Reinvest into agency mortgage-backed securities (MBS) the amount of principal payments from the Federal Reserve's holdings of agency debt and agency MBS received in each calendar month that exceeds a cap of $35 billion per month.
- Allow modest deviations from stated amounts for reinvestments, if needed for operational reasons.
- Engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions."
- In a related action, the Board of Governors of the Federal Reserve System voted unanimously to approve a
3/41/2 percentage point increase in the primary credit rate to44.5 percent, effectiveNovember 3,December 15, 2022. In taking this action, the Board approved requests to establish that rate submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco.
Press conference
December 14, 2022, 2:30 p.m. ET · Read the transcript
What Powell said that the statement didn't
- The chair said the FOMC raised the policy interest rate by ½ percentage point, bringing the target range to 4¼ to 4½ percent, and that this was a step-down from the 75 basis point pace of the previous four meetings.
- The chair said the median projection in the Summary of Economic Projections for the federal funds rate is 5.1 percent at the end of next year, 4.1 percent at the end of 2024, and 3.1 percent at the end of 2025, and that 17 of 19 FOMC participants wrote down a peak rate of 5 percent or more.
- The chair said the median projection for real GDP growth is just 0.5 percent this year and next, and that the median projection for the unemployment rate rises to 4.6 percent at the end of next year.
- The chair said that the inflation data for October and November show a welcome reduction in the monthly pace of price increases, but that it will take substantially more evidence to give confidence that inflation is on a sustained downward path.
- The chair said that the most important question now is no longer the speed of rate increases but the ultimate level and how long to remain restrictive, and that the decision on the February meeting will be based on incoming data and financial conditions.
Summary generated automatically from the transcript and the statement.