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For additional information relating to this article, please contact:

Thomas StorringDirector – Economics and Statistics
Tel: 902-424-2410Email: thomas.storring@novascotia.ca

December 14, 2022
US 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 50 basis points to 4.25% to 4.50%. 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.

While job gains have been robust and the unemployment rate remained low in recent months, recent economic indicators point to modest growth in spending and production. The war in Ukraine continues to put upward pressure on inflation and continues to weigh on global economic activity. 

US inflation remains elevated reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures. The United States Consumer Price Index for All Urban Consumers increased 7.1% year-over-year in November 2022. 

The FOMC median projection for US real GDP growth in 2022 was increased to 0.5% (previously 0.2% in September 2022). Projections for growth in 2023 and 2024 were however lowered to 0.5% and 1.6%, respectively. Inflation projections are higher for each of the next three years, at 5.6% in 2022, 3.1% in 2023 and 2.5% in 2024. The Federal funds rate median projection is for 4.4% at the end of 2022. The year end rate for 2023 and 2024 is projected for 5.1% and 4.1%, respectively, above the longer-run 2.5% projection for the Federal Funds rate.

The Committee anticipates that ongoing increases in the target range will be appropriate. The Committee will continue to monitor economic developments and is prepared to adjust the monetary policy measures as appropriate, taking into account the cumulative tightening of monetary policy as well as the lags with which monetary policy affects economic activity and inflation. The next scheduled FOMC meeting will be held on January 31-February 1, 2023.

 

 

 

Source: US Federal Reserve, FOMC StatementSummary of Economic Projections (December 14, 2022)



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