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May 04, 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 half point to 0.75 to 1.0 per cent. The FOMC anticipates that ongoing increases will be appropriate. The Committee will begin reducing its holdings of Treasury securities, agency debt, and agency mortgage-back securities on June 1, 2022. Treasury securities will be reduced by up to $30 billion per month for 3 months prior to an increase to $60 billion per month and agency debt and agency mortgage-backed securities will be reduced up to $17.5 billion per month for 3 months before increasing to $35 billion per month.
US real GDP growth was estimated to have declined 1.4% (seasonally adjusted annualized rate) in Q1 2022, the first decline since Q2 2020. However, household spending and business fixed investment remained strong. Unemployment rate has declined along with robust job gains in recent months.
Inflation is elevated, reflecting supply and demand imbalances, higher energy prices and broder price pressures. In addition, COVID-related lockdowns in China are likely to increase supply chain disruptions. The United States Consumer Price Index for All Urban Consumers increased 8.5 per cent year-over-year in March 2022.
The Russian invasion of Ukraine was noted as causing tremendous human and economic hardship. The invasion and related events are creating additional upward pressure on inflation and are expected to weigh on economic activity
The Committee will continue to monitor economic developments and is prepared to adjust the monetary policy measures as appropriate. The next scheduled FOMC meeting will be held on June 15, 2022. A summary of updated economic projections will be provided at the same time.
Source: US Federal Reserve, FOMC Statement
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