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June 15, 2022US MONETARY POLICY At its scheduled Federal Open Market Committee (FOMC) meeting, the Federal Reserve announced that it will raise the target range for the federal funds rate by a three quarter of a point to 1.50 to 1.75 per cent. The FOMC anticipates that ongoing increases will be appropriate. The Committee did not make changes to it's plan to reduce holdings of Treasury securities, agency debt, and agency mortgage-back securities that started June 1, 2022. Treasury securities will be reduced by up to $30 billion per month for 3 months prior to an increase to $60 billion per month and agency debt and agency mortgage-backed securities will be reduced up to $17.5 billion per month for 3 months before increasing to $35 billion per month.
US real GDP growth was negative in Q1 2022, however, household spending and business fixed investment remained strong. Job gains have continued in recent months and the unemployment rate is down substantially. The Russian invasion of Ukraine was noted as causing tremendous human and economic hardship. The invasion and related events are creating additional upward pressure on inflation and are expected to weigh on economic activity.
Inflation is elevated, reflecting supply and demand imbalances, higher energy prices and broader price pressures. In addition, COVID-related lockdowns in China are likely to increase supply chain disruptions. The United States Consumer Price Index for All Urban Consumers increased 8.6 per cent year-over-year in May 2022.
The Committee will continue to monitor economic developments and is prepared to adjust the monetary policy measures as appropriate. The next scheduled FOMC meeting will be held on July 26-27, 2022.
Source: US Federal Reserve, FOMC Statement
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