May 03, 2023
March 22, 2023
Jerome H. Powell
May 3, 2023 FOMC Statement
FOMC statement
Federal Reserve issues FOMC statement
For release at 2:00 p.m. EDT
Recent indicators point to Economic activity expanded at a modest growth pace in spending and production. the first quarter. Job gains have picked up been robust in recent months months, and are running at a robust pace; the unemployment rate has remained low. Inflation remains elevated.
The U.S. banking system is sound and resilient. Recent developments are likely to result in tighter Tighter credit conditions for households and businesses and are likely to weigh on economic activity, hiring, and inflation. The extent of these effects is remains uncertain. The Committee remains 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 4-3/4 to 5 to 5-1/4 percent. The Committee will closely monitor incoming information and assess the implications for monetary policy. The Committee anticipates that some In determining the extent to which additional policy firming may 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 time, the 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 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 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; Lisa D. Cook; Austan D. Goolsbee; Patrick Harker; Philip N. Jefferson; Neel Kashkari; Lorie K. Logan; and Christopher J. Waller.
For media inquiries, please email [email protected] or call 202-452-2955.
Implementation Note issued March 22, May 3, 2023
Our summary
What changed
- Raised the federal funds rate target range to 5 to 5-1/4 percent, up from 4-3/4 to 5 percent.
- Updated economic description: first-quarter activity expanded modestly, while job gains remain robust and unemployment low.
- Removed the phrase 'recent developments are likely to result in' before 'tighter credit conditions,' now stating tighter conditions are likely to weigh on activity.
- Changed forward guidance: dropped the sentence anticipating 'some additional policy firming may be appropriate,' now only referencing 'additional policy firming' in the context of determining the extent.
- Vote was unanimous, with the same 11 members as the previous statement.
Implications
The removal of the explicit anticipation of further hikes suggests the FOMC is less committed to additional tightening, possibly signaling a pause or data-dependent approach.
The shift to describing tighter credit conditions as a current likelihood rather than a result of recent developments may indicate the FOMC sees these effects as more established, potentially reducing the need for further rate increases.
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
4.95.15 percent, effectiveMarch 23,May 4, 2023. - As part of its policy decision, the Federal Open Market Committee voted to 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
March 23,May 4, 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
4-3/4 to5 to 5‑1/4 percent. - Conduct standing overnight repurchase agreement operations with a minimum bid rate of
55.25 percent and with an aggregate operation limit of $500 billion. - Conduct standing overnight reverse repurchase agreement operations at an offering rate of
4.85.05 percent and with a per-counterparty limit of $160 billion per day. - 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 1/4 percentage point increase in the primary credit rate to
55.25 percent, effectiveMarch 23,May 4, 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
May 3, 2023, 2:30 p.m. ET · Read the transcript
What Powell said that the statement didn't
- The chair said the FOMC removed the sentence from the March statement that "anticipates that some additional policy firming may be appropriate," replacing it with language about taking into account cumulative tightening, lags, and economic developments, marking a meaningful change in forward guidance.
- The chair said the Fed staff's forecast, independent of participants' views, was broadly for a mild recession, characterized by a rise in unemployment smaller than typical in modern-era recessions, though he declined to detail the staff's current forecast, deferring to the minutes.
- The chair said a failure to raise the debt ceiling in a timely way would be unprecedented, put the U.S. in uncharted territory, and could have highly uncertain and potentially quite adverse consequences for the U.S. economy, and that no one should assume the Fed can protect the economy from such effects.
- The chair said the February 14 presentation on interest rate risk was an informational briefing to the whole Board, with one page on Silicon Valley Bank discussing mark-to-market losses, but it contained nothing about the risk of a bank run and was not presented as urgent or alarming.
- The chair said the monetary policy and financial stability tools are not in conflict and are working well together, citing the use of lending facilities to support banks while using monetary policy tools to foster maximum employment and price stability, and he noted the separation principle has its limits.
Summary generated automatically from the transcript and the statement.