FOMC Update
June 14, 2023
As expected, the FOMC did not change its benchmark rate range from 5.00%-5.25%. This is the first pause since the Federal Reserve began hiking in March 2022. The updated forecast projects two more rate hikes this year, toping out at 5.6%, then tapering off in 2024 and 2025 to 4.6% and 3.4% respectively. That’s an increase of 50bp for 2023, and 25bp for 2024 and 2025 compared to March projections. In addition, the updated forecast shows economic growth to 1% (up from 0.4%), unemployment to 4.1% (down from 4.5%), core inflation 3.9% (up from 3.6%) and inflation 3.2% (down from 3.3%) for 2023. The Federal Reserve noted that job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated.Rates and Market:
- Fed Funds Target: 5.00%-5.25%.
- Market Reaction: The release was viewed as a hawkish pause. Equities sold off and rates increased initially, but the market recovered with S&P 500 lower 6 points, 10Y treasuries up 2bp to 3.8% and 2Y treasuries up 8bp to 4.7%.
The FOMC announced the following actions and analysis:
- Unanimous policy vote
- The Fed notes that ”Holding the target range steady at this meeting allows the committee to assess additional information and its implications for monetary policy.” The committee also stated it will continue to reduce the balance sheet by $95B each month as previously stated.