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Economy in Brief

FOMC Increases Funds Rate, Raises Inflation Outlook & Lowers GDP Projections
by Tom Moeller  September 21, 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 3.00% - 3.25%. It was the third consecutive increase of that magnitude and places the rate at the highest level since January 2008. The Fed "... anticipates that ongoing increases in the target range will be appropriate." The move was expected by the Action Economics Forecast Survey.

The statement accompanying today's action read, "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."

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 members of the FOMC.

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

The Fed updated its economic projections at today's meeting. It lowered its upcoming GDP growth forecast and raised its PCE inflation forecast. Other changes were as follows:

FOMC Projections 2022 (Old) 2022 (New) 2023 (Old) 2023 (New) 2024 (Old) 2024 (New) 2025
Real GDP (Q4/Q4) 1.7 0.2 1.7 1.2 1.9 1.7 1.8
PCE Price Inflation (Q4/Q4) 5.2 5.4 2.6 2.8 2.2 2.3 2.0
Core PCE Price Index (Q4/Q4) 4.3 4.5 2.7 3.1 2.3 2.3 2.1
Unemployment Rate (4Q %) 3.7 3.8 3.9 4.4 4.1 4.4 4.3
Appropriate Fed Funds Rate (%) 3.4 4.4 3.8 4.6 3.4 3.9 2.9
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