By Tom Burnett CFA
On March 22, 2023, the Federal Reserve raised the Fed Funds rate by 25 basis points to a range of 4.75%-5.0%. The vote was unanimous among all 12 voting members. In its press release, the Fed warned that additional “policy firming may be appropriate.” The Fed is remaining ‘attentive’ to the risks of higher inflation and is strongly committed to attaining its goal of 2% annual inflation. In addition to the decision to raise the Fed Funds rate, the Fed announced its intention to continue to shrink its balance sheet by reducing the holdings of Treasury and mortgage-backed securities at the previously announced monthly levels.
In its quarterly projections, the Fed assumes that the Fed Funds rate will average 5.1% this year, declining to 4.3% for 2024. PCE inflation will average 3.3% this year and 2.5% next year.
The next Fed public meeting will be May 3, 2023.