By Tom Burnett CFA
On December 14, 2022, the Federal Reserve voted unanimously to raise the Fed Funds rate to a range of 4.25%-4.50%. This action follows four consecutive increases of 75 basis points at previous meetings. The Fed press release makes it clear that inflation remains a major economic issue and stresses that the goal of 2% inflation remains intact. In addition, the Fed will continue to reduce its holdings of government securities by $60 billion per month along with a reduction in mortgage-backed securities of $35 billion per month. The latest Fed balance sheet report (H.4.1) of December 8, 2022 shows total assets of $8.5 trillion, compared to a recent high of over $9 trillion.
Along with the press release on raising the Fed Funds target rate, the Fed also released its latest quarterly list of economic projections. Some key projections follow:
-2023 unemployment rate is now expected to average 4.6% up from 4.4% in the September projections;
-PCE inflation is now forecast at 3.1% in 2023, up from 2.8% in the September projections;
-the Fed Funds rate is now expected to average 5.1% in 2023, up from a projection of 4.6% in September.
The next Fed monetary policy meeting is scheduled for February 1, 2023.
Tom Burnett CFA is Director of Research