Meeting Date: June 14-15, 2022
Federal Open Market Committee (FOMC) Meeting Results
FOMC meeting highlights:
1. Surprise! The Fed increased its Target Fed Funds rate by 0.75%, instead of the predicted 0.5%. The new range is 1.50%-1.75%.
2. The Committee declared it is highly attentive to risks of high inflation.
3. The vote was not unanimous! Voting against this action was Esther L. George, who preferred at this meeting to raise the target range for the federal funds rate by only 0.5 percentage point to a range of 1-1/4 percent to 1-1/2 percent.
4. The FOMC, which began to shrink its securities portfolio on June 1, 2022, announced it will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in the Plans for Reducing the Size of the Federal Reserve's Balance Sheet that it announced at the May 2022 FOMC meeting.
5. The Committee emphasized that it is strongly committed to returning inflation to its 2% objective.
6. New dot plot projections shown the Fed funds rate could be as high as 3.75% by year end, and 4.25% by the end of 2023.
Job growth and economic activity continue to strengthen, but inflation is too high!!
• “Overall economic activity appears to have picked up after edging down in the first quarter. Job gains have been robust in recent months, and the unemployment rate has remained low.
• Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices and broader price pressures.
• The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The invasion and related events are creating additional upward pressure on inflation and are weighing on global economic activity.
• In addition, COVID-19-related lockdowns in China are likely to exacerbate supply chain disruptions.””
Fed funds rate increased. Fed funds range raised by 0.75% to a new range of 1.50% to 1.75%.
• “The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run.
• In support of these goals, the Committee decided to raise the target range for the federal funds rate to 1.50%-1.75% and anticipates that ongoing increases in the target range will be appropriate.
• In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in the Plans for Reducing the Size of the Federal Reserve's Balance Sheet that were issued
• In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook.
• The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals.
• The Committee's assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
• The Board of Governors of the Federal Reserve System voted unanimously to raise the interest rate paid on reserve balances to 1.65%, effective June 16, 2022.
• The Fed issued its interest rate forecast, the so-called dot plot. The rate forecast indicates The Fed is likely to raise the target Rate up as high as 3.75% by the end of 2022, and to 4.25% by the end of 2023! The new dot plot
is shown below.
• Finally, the Fed also issued its 2nd forecasts of 2022 for GDP, the unemployment rate and inflation (PCE Index). The chart below is a summary of the latest forecast compared to their previous forecast.
Voting Results: One dissenting vote
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; James Bullard; Lisa D. Cook; Patrick Harker; Philip N. Jefferson; Loretta J. Mester; and Christopher J. Waller. Voting against this action was Esther L. George, who preferred at this meeting to raise the target range for the federal funds rate by 0.5 percentage point to 1.25% to 1.50%. Patrick Harker voted as an alternate member at this meeting.
Next Meeting: July 26-27, 2022