March 16, 2022

Northwest FCS News

Meeting Date: March 15-16, 2022

Federal Open Market Committee (FOMC) Meeting Results

FOMC highlights:

1. We have liftoff- The Fed increased its Target Fed Funds rate 0.25%. The new range is 0.25% - 0.50%.

2. Only one voting member of the FOMC dissented. James Bullard, President of the St. Louis Fed, wanted a larger rate hike of 0.50%.

3. The FOMC, which ended the bond buying program the previous week, signaled that could soon announce a plan to shrink it $9 trillion asset portfolio.

4. New dot plot projections shown the Fed funds rate could be 1.90% by year end, and 2.75% by the end of 2023. This rate was projected to hold steady through calendar year 2024.

Economic Highlights: 

Job growth and economic activity continue to strengthen, but inflation is too high!

  • “Indicators of economic activity and employment have continued to strengthen. Job gains have been strong in recent months, and the unemployment rate has declined substantially.  
  • 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 implications for the U.S. economy are highly uncertain, but in the near term the invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity.”

Fed funds rate increased. Fed funds range raised by a 0.25% to 0.25% - 0.50%. Fed signaled that a plan will be forthcoming to shrink it $9 trillion security portfolio.

  • “The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With appropriate firming in the stance of monetary policy, the Committee expects inflation to return to its 2 percent objective and the labor market to remain strong.
  • In support of these goals, the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent and anticipates that ongoing increases in the target range will be appropriate. In addition, the Committee expects to begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities at a coming meeting.
  • 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 0.4 percent, effective March 17, 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 1.9% by the end of 2022, and to 2.8% by the end of 2023!  The new dot plot is shown below.
March FOMC dot plot
  • Finally, the Fed also issued its first 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.
Fed expects inflation to fall


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; Esther L. George; Patrick Harker; Loretta J. Mester; and Christopher J. Waller. Voting against this action was James Bullard, who preferred at this meeting to raise the target range for the federal funds rate by 0.5 percentage point to 1/2 to 3/4 percent. Patrick Harker voted as an alternate member at this meeting.
Next Meeting: May 3-4, 2022