By Tom Burnett CFA
On November 2, 2022, the Federal Reserve announced that it would raise the Fed Funds rate to a range of 3 ¾-4%. It was the fourth consecutive increase of 75 basis points. The Fed ‘s vote on this action was unanimous.
The Statement suggests that ‘ongoing’ increases will be necessary to get the inflation rate back down to the goal of 2%. The Statement also indicated that the Fed would ‘adjust this stance of monetary policy” if ‘risks’ emerge that the twin goals of price stability and full employment are endangered. This tone suggests that the Fed will look carefully at the employment data and be prepared to adjust its tightening methods, if the data suggest that a ‘pause’ would be warranted.
In addition, the Fed indicated that it would continue to shrink its balance sheet with a $60 billion monthly reduction in Treasury holdings and a $35 billion monthly reduction in holdings of mortgage-backed securities.
Market rates did not move sharply on the announcement, as the yield on the Ten-Year Treasury Bond remained at the 4.0% level.
The next Fed monetary meeting is set for December 13-14, with an announcement of interest rate policies on the 14th.
Tom Burnett CFA is Director of Research