FOMC Update
July 26, 2023
As expected, the FOMC raised its benchmark rate by 25bp to a new range of 5.25%-5.50%, the highest fed funds rate level in 22Ys. This marks the 11th rate hike since the Fed began hiking in March 2022, when the rate was near zero. The Fed statement suggests that officials will be data-dependent and are holding their options open to determine the extent of additional policy firming.Rates and Market:
- Fed Funds Target: 5.25%-5.50%
- Market Reaction: S&P 500 dropped from the highest level since April 2022. US Treasury yields were little changed. The market is pricing a 50% likelihood of an additional quarter-point increase in the fed funds target by year end.
The FOMC announced the following actions and analysis:
- Unanimous policy vote.
- The FOMC noted that they will “continue to assess additional information and its implications for monetary policy.” The Fed stated that inflation remains “elevated” while improving its description of economic growth from “modest” to “moderate”.
- The Fed sees the US Banking System as “sound and resilient”.