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.

U.S. import prices fell 0.6% (+2.7% y/y) during November after weakening 0.4% in October. Prices fell 4.6% from July through November, but rose 2.7% y/y. A 0.5% decline had been expected in the Action Economics Forecast Survey. Export prices declined 0.3% in November (6.3% y/y), down for the fifth straight month. A 0.7% decline was expected. None of the import & export prices are seasonally adjusted.

Import prices of foods, feeds & beverages increased 1.8% in November (4.0% y/y) following a 0.9% October decline. Industrial supplies & materials prices fell 2.5% (+3.7% y/y), the fifth consecutive monthly decline. Capital goods prices improved 0.1% last month (3.0% y/y) after increasing 0.2%, while motor vehicle & parts prices held steady (3.0% y/y) after a 0.6% October increase. Nonauto consumer goods import prices fell 0.2% in November (+0.6% y/y), the third straight month of decline.

Petroleum import prices fell 3.3% last month (+11.2% y/y) and are down 24.7% since June. Nonpetroleum import costs eased 0.3% (+1.9% y/y). They have fallen for seven consecutive months, off 2.4% since April.

Amongst export categories, food & beverage export prices rose 2.7% in November (12.2% y/y) after falling for five consecutive months. The cost of industrial supplies & materials declined 1.1% (+7.7% y/y), down for the fifth straight month. Capital goods export prices weakened 0.2% (+3.3% y/y) and followed no change in October prices. Motor vehicle & parts export prices were unchanged last month (4.4% y/y) after easing 0.2% in October. Nonauto consumer goods prices fell 0.3% (+3.0% y/y) and reversed the prior month's increase.

Agricultural product prices strengthened 2.3% in November (12.0% y/y) after falling for four straight months. Nonagricultural product costs declined 0.6% (+5.6% y/y), down in each month since June.

The import and export price series can be found in Haver's USECON database. Detailed figures are available in the USINT database. The expectations figure from the Action Economics Forecast Survey is in the AS1REPNA database.