The Fed raised interest rates by 0.25% to a new fed funds target of 5.00%. Here’s the text of part of the Fed’s press release issued at 2:00 pm ET on March 22, 2023:
“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 4-3/4 to 5 percent. The Committee will closely monitor incoming information and assess the implications for monetary policy. The Committee anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time. In determining the extent of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans. The Committee is strongly committed to returning inflation to its 2 percent objective.”
The FOMC vote in favour of this policy statement was unanimous.
This was exactly what we expected but it was the most challenging forecast since the Fed started raising interest rates in March 2022 because of the ongoing banking crisis.
Sven Franssen