FOMC Update

July 27, 2022
In a unanimous decision, the FOMC raised its benchmark interest rate by 0.75% in what are now back-to-back 75bps rate hikes. Aside from last month's 75bps hike, November 1994 was the last time a hike of this size occurred. That was the only hiking cycle in the last 30 years that did not precede a recession, mostly because NAFTA started taking off earlier that year. With the Fed Fund target rate at 2.50% (upper bound), policy is “neutral” at this point, with Chairman Powell pointing to the Fed’s long-run estimate of 2.40%. However, with the current and projected environment, Powell was quick to point out that the Fed needs to get to “moderately” restrictive, so a 50-75bps September move seems to be still on the table. Today’s announcement was aligned with previous Fed guidance and the implied market expectation.
Rates and Market: 
  • Fed Funds Target: 2.25% – 2.50% 
  • Market Reaction: Pre-announcement Treasury yields were down ~2bps across the curve. Post-announcement, Treasury yields are down ~8-10bps, and US equities are rallying ~1% - 3+%
The FOMC announced the following actions and analysis: 
  • 12-0 vote 
  • The Committee remains highly attentive to inflationary risks 
  • Spending and production have softened, however job gains remain robust
  • The ongoing war between Russia and Ukraine continue to add upward inflationary pressure and market volatility
  • Balance sheet reduction is proceeding at the announced pace
Read Full FOMC Statement
Implementation Note Issued July 27, 2022