FOMC Update
December 14, 2022
As expected, the FOMC raised its benchmark rate by 50bp to a new range of 4.25%-4.50%. Further increases are expected in 2023 with the benchmark rate projected to rise to 5.10% while tapering off in 2024, 2025, and in the long run to 4.10%, 3.10%, and 2.50% respectively – higher levels than previously indicated. The updated forecast also shows economic growth slowing to 0.50% (previous forecast was 1.20%) and the unemployment rate rising to 4.60% (previous forecast 4.40%) in 2023. The Federal Reserve noted that growth has been modest, inflation elevated, and job gains robust.Rates and Market:
- Fed Funds Target: 4.25% – 4.50%
- Market Reaction: Market consensus of the Fed stance is hawkish. The US Stock market reversed earlier gains. Treasury yields rose with the 10-year yield advancing 4bp to 3.54%
The FOMC announced the following actions and analysis:
- Unanimous policy vote (12 – 0)
- The Fed reiterated that it will take into account the cumulative effects of the rate hikes in setting policy and that it will continue to reduce their balance sheet by $95 billion a month