September 21, 2022
The FOMC raised its benchmark interest rate by 75 basis points for the third consecutive time to a new rate range of 3.00%-3.25%, the highest since before the 2008 financial crisis. The FOMC reiterated that “ongoing increases in the target range will be appropriate,” and that inflation remains elevated. Fed officials now expect the benchmark rate to rise to 4.40% by year end, a 1.00% increase from their previous forecast. Further increases are expected in 2023 with the benchmark rate projected to rise to 4.60% while tapering off in 2024 and 2025 to 3.90% and 2.90% respectively. The updated forecast also shows economic growth slowing to 1.20% (previous forecast was 1.70%) and the unemployment rate rising to 4.40% (previous forecast 3.90%) by the end of 2023.Rates and Market:
- Fed Funds Target: 3.00% – 3.25%
- Market Reaction: The stock market reversed earlier gains with the S&P 500 Index and Dow Jones Industrial Average now trading in negative territory. 2-year Treasury rates which hovered around 4.00% prior to the policy decision, reached a high of 4.11%. 10-year Treasury rates increased 5bps to 3.62%. 10-year Treasury rates and 30-year Treasury rates inverted briefly after the announcement. The dollar index hit a new record high.
The FOMC announced the following actions and analysis:
- Unanimous policy vote
- Russia’s war in Ukraine continues to cause human and economic hardships elevating inflationary pressures and weighing on global economic activity.