FEDERAL OPEN MARKET COMMITTEE (FOMC) MEETING RESULTS:
DATE: July 26 - 27, 2022
- 1The Fed increased its Target Fed Funds rate by 0.75% despite the warning of some experts that the rate hike would be a full 1%. The new Fed Funds Target range is now 2.25% - 2.50%.
- 2Unlike the June 2022 meeting vote, this meeting's vote was unanimous!
- 3The FOMC, which began to shrink its securities portfolio on June 1, 2022, announced it will continue reducing its holding of Treasury securities, agency debt and agency mortgage-backed securities, as described in the Plans of Reducing the size of the Federal Reserve's Balance Sheet that was announced at the May 2022 FOMC meeting.
- 4The Committee emphasized that it is strongly committed to returning inflation to its 2% objective.
ECONOMIC HIGHLIGHTS: Economic activity continue to weaken, and inflation remains too high!
- Recent indicators of spending and production have softened
- Nonetheless, 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.
- Russia's war against Ukraine is causing tremendous human and economic hardship. The war and related events are creating additional upward pressure on inflation and are weighing on global economic activity.
The Committee is highly attentive to inflation risks.
ANNOUNCEMENTS: Fed funds rate increased. Fed funds range raised by a 0.75% to a new range of 2.25% to 2.50%, and balance sheet reductions continue.
- The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run.
- In support of these goals, the Committee decided to raise the target range for the federal funds rate to 2.25% to 2.50% and anticipates that ongoing increases in the target range will be appropriate.
- In addition, the Committee will continue reducing its holding of Treasury securities, 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.
- The Committee is strongly committed to returning inflation to its 2%.
- In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook.
- The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals.
- The Committee's assessments will consider a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments..
- The Board of Governors of the Federal Reserve System voted unanimously to raise the interest rate paid on reserve balances to 2.4%, effective July 28, 2022.
VOTING RESULTS: One dissenting vote
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; James Bullard; Susan M. Collins; Lisa D. Cook; Ester L. George; Philip N. Jefferson; Loretta J. Mester; and Christopher J. Waller
NEXT MEETING: September 19 - 20, 2022
ABOUT THE AUTHOR
Dr. Edmond J. Seifried, PhD | Chief Economist
Dr. Seifried is Professor Emeritus of Economics and Business at Lafayette College in Easton, Pennsylvania. He also serves as the Chief Economist for SB Value Partners, L.P., and Executive Consultant for the Sheshunoff CEO Affiliation Programs.
Dr. Seifried serves as the dean of the Virginia and West Virginia Banking Schools and has served on the faculty of numerous banking schools including: Stonier Graduate School of Banking, and the Graduate School of Banking of the South.