The FOMC raised the Fed Funds Target Range by 75 bps to 1.50-1.75%. What’s more, the committee is transitioning into a more aggressive policy stance by pulling policy rates into restrictive levels by next year and keeping them there for two years, economists at Nordea report.
“The FOMC raised the Fed Funds Target Range by 75bps to 1.50-1.75% with only one dissenter (Esther George, the otherwise hawkish official, who opted for a 50 bps hike).”
“The new dot plot shows a median Fed Funds Target Range at 3.25-3.50% at end-2022; 3.75-4.0% at end- 2023; followed by two cuts in 2024 to 3.25-3.50%, and the longer-run median dot edging back up to 2.5% from 2.375%.”
“The FOMC statement dropped the expectation of a strong labor market, instead it emphasized that the committee is ‘strongly committed’ to returning inflation to the target.”
“The Summary of Economic Projections now show a substantial downgrade to GDP growth, an increase in the unemployment rate, and slightly higher inflation before returning to the target range at 2%.”