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March 16, 2022US MONETARY POLICY At its scheduled Federal Open Market Committee (FOMC) meeting, the Federal Reserve announced that it will raise the target range for the federal funds rate by a quarter point to 0.25 to 0.50 per cent. The FOMC anticipates that ongoing increases will be appropriate and expects to begin to reduce its holding of Treasury securities, agency debt, and agency mortgage-back securities at a coming meeting.
US economic activity and employment have continued to strengthen. Job gains have been strong and the unemployment rate has declined substantially. The Russian invasion of Ukraine was noted as causing tremendous human and economic hardship. The implication for the US economy are highly uncertain, but it is expected to create additional upward pressure on inflation and weigh on activity in the near term.
The FOMC median projection for US real GDP growth in 2022 was lowered to 2.8% (previously 4.0% in December 2021). Projections for growth in 2023 and 2024 were unchanged at 2.2% and 2.0%, respectively. Inflation projections are higher for each of the next three years, at 4.3% in 2022, 2.7% in 2023 and 2.3% in 2024. The Federal funds rate median projection is for 1.9% at the end of 2022. The year end rate for 2023 and 2024 is projected for 2.8%, above the longer-run 2.4% projection for the Federal Funds rate.
Source: US Federal Reserve, FOMC Statement
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