The Fed Hikes by 0.50%

This afternoon, the Federal Reserve decided to raise interest rates by 0.5%. The new target range for Fed funds is 4.25% to 4.50%. The vote was unanimous.

In the policy statement, the Fed said there’s been modest growth in spending and production while job gains have been robust. The Fed said that inflation remains elevated due to imbalances in supply and demand.

The Fed said it expects more rate hikes will be needed to bring inflation back to 2%. The Fed is also continuing to reduce its massive holdings of Treasury debt and mortgage-back securities.

The Fed also released its economic forecasts for the coming few years. The median vote for interest rates for 2023 is now 5.1%. I think that’s too high. It had been at 4.6%.

In September, none of the 19 Fed officials expected rates to get to 5% next year. Now 17 do. One voter expects rates to get to 5.63% through 2025.

The stock market is down since the statement came out. I suspect that the hawkish forecasts concerned the bulls.

Here’s the policy statement and here are the economic projections.

Posted by Eddy Elfenbein on December 14th, 2022 at 2:30 pm

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.