Fed Scales Back Pace of Rate Increase
by:Tom Moeller
|in:Economy in Brief
At today's meeting of the Federal Open Market Committee, the targeted Federal Funds Rate was raised by 50 basis points to 4.25% - 4.50%. The action followed four consecutive 75 basis point increases. Up from a low of 0.125% in March of this year, the rate was set to the highest since early-December 2007.
The Fed's statement following the meeting was little changed from the September meeting.
"Recent indicators point to modest growth in spending and production. 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 food and energy prices, and broader price pressures. The Committee is highly attentive to inflation risks. The Committee is strongly committed to returning inflation to its 2 percent objective."
"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 May."
Today's action was endorsed by each member of the FOMC.
An updated set of economic projections was issued at today's meeting. The Fed lowered GDP growth projections from the September meeting to 0.5% from 1.2% in 2023, and 1.6% from 1.7% in 2024. The 2023 & 2024 unemployment rate estimates were raised for both years to 4.6% from 4.4%. The PCE inflation estimate was raised to 3.1% from 2.8% for 2023 and to 2.5% from 2.3% for 2024, while the 2025 estimate was raised to 2.1% from 2.0%. The core PCE inflation estimate for 2023 was raised to 3.5% from 3.1% and for 2024, it was raised to 2.5% from 2.3%. The core inflation estimate for 2025 was unchanged at 2.1%.
The "appropriate" Federal Funds Rate estimate for 2023 was raised to 5.1% from 4.6% and to 4.1% from 3.9% in 2024.
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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