The Federal Open Market Committee announced today that it would raise the target range for the federal funds rate by 25 basis points to 4.5% to 4.75%. The decision marked the eighth consecutive rate hike, though the committee’s most recent rate hikes have ranged from 50 to 75 basis points.
In a sentence, the FOMC noted that inflation had eased somewhat “but remains elevated.” He warned that committee members anticipate further rate hikes will be needed to bring inflation down to the Fed’s 2% target range.
Fed Chairman Jerome Powell told a news conference that he does not expect the FOMC to cut rates this year. “Our focus is not on short-term moves but on sustained changes in broader financial conditions,” Powell said. “And in our judgment, we’re not yet in a restrictive enough policy stance, so we say we expect continued increases to be appropriate.”
Powell added that he was optimistic that inflation could be brought under control without significant economic pain. “My base case is that the economy can go back to 2% inflation without a really significant recession or a really big increase in unemployment,” he said. “I think that is a possible outcome. I think a lot of meteorologists would say it’s not the most likely outcome, but I would say there is a possibility.” The FOMC meets again on March 21 and 22.
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