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Economy in Brief

FOMC Increases Funds Rate, Raises Inflation & Lowers GDP Projections
by Tom Moeller  June 15, 2022

At today's meeting of the Federal Open Market Committee (FOMC), the Fed announced a 75 basis point increase in the target for the Federal funds rate to 1.50% - 1.75%. It placed the rate at the highest level since March 2020. The move was greater-than-expected in the Action Economics Forecast Survey due to recent, strong inflation readings.

Fed Chairman Powell indicated that "today's 75 basis point increase is an unusually large one, and I do not expect moves of this size to be common..."

The statement accompanying today's action indicated that "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."

In addition, the Fed will continue reducing its portfolio of Treasury securities and agency debt and agency mortgage-backed securities.

Today's action was endorsed by all but one member of the FOMC, who voted for a 50 basis point increase.

The statement issued following today's meeting can be found here.

The Fed updated its economic projections at today's meeting. It raised its 2022 PCE Inflation forecast from 4.3% to 5.2%. Other changes were as follows:

FOMC Projections 2022 (Old) 2022 (New) 2023 (Old) 2023 (New) 2024 (Old) 2024 (New)
Real GDP (Q4/Q4) 2.8 1.7 2.2 1.7 2.0 1.9
Core PCE Price Index (Q4/Q4) 4.1 4.3 2.6 2.7 2.3 2.3
Unemployment Rate (4Q %) 3.5 3.7 3.5 3.9 3.6 4.1
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