February 01, 2023
December 14, 2022
Statement·Presser·Minutes·Policy
Jerome H. Powell
February 1, 2023 FOMC Statement
FOMC statement
Federal Reserve issues FOMC statement
For release at 2:00 p.m. 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 has eased somewhat but remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures. elevated.
Russia's war against Ukraine is causing tremendous human and economic hardship. The war hardship and related events are is contributing to upward pressure on inflation and are weighing on elevated global economic activity. uncertainty. 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 4-1/4 to 4-1/2 to 4-3/4 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 extent 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. its previously announced plans. 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; Austan D. Goolsbee; Patrick Harker; Philip N. Jefferson; Loretta J. Mester; Neel Kashkari; Lorie K. Logan; and Christopher J. Waller.
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Implementation Note issued February 1, 2023
Implementation Note issued December 14, 2022
Our summary
What changed
- Raised the federal funds rate target range by 25 basis points to 4-1/2 to 4-3/4 percent.
- Changed language on inflation from 'remains elevated' to 'has eased somewhat but remains elevated.'
- Updated the Russia-Ukraine paragraph to note the war is contributing to 'elevated global uncertainty' instead of specific price pressures.
- Shifted from determining the 'pace' to the 'extent' of future rate increases, signaling a potential slowdown in hikes.
- Noted balance sheet reduction will continue as described in 'previously announced plans' rather than referencing the May plans.
Implications
The shift from 'pace' to 'extent' suggests the FOMC is moving toward a more data-dependent approach, possibly nearing the end of the tightening cycle. The acknowledgment that inflation has eased may signal a reduced urgency for aggressive hikes, while the emphasis on global uncertainty indicates a cautious outlook.
Summary generated automatically from the statements. Not investment advice.
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
4.44.65 percent, effectiveDecember 15, 2022.February 2, 2023. - 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
December 15, 2022,February 2, 2023, 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
4-1/4 to4-1/2 to 4-3/4 percent. - Conduct overnight repurchase agreement operations with a minimum bid rate of
4.54.75 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
4.34.55 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
1/21/4 percentage point increase in the primary credit rate to4.54.75 percent, effectiveDecember 15, 2022.February 2, 2023. 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
February 1, 2023, 2:30 p.m. ET · Read the transcript
What Powell said that the statement didn't
- The chair said the U.S. economy slowed significantly last year, with real GDP rising at a below-trend pace of 1 percent.
- The chair noted that the labor market remains extremely tight, with the unemployment rate at a 50-year low and job vacancies still very high.
- The chair stated that the disinflationary process has started, but it is at an early stage and not yet visible in core services excluding housing, which represents 56 percent of the core inflation index.
- The chair said that the median projection from the December meeting was for the federal funds rate to reach between 5 and 5¼ percent, but that this would be updated at the March meeting.
- The chair acknowledged that financial conditions have tightened significantly over the past year, but emphasized that the focus is on sustained changes rather than short-term moves.
Summary generated automatically from the transcript and the statement.