The Federal Open Market Committee today announced it would raise the target range for the federal funds rate by 25 basis points to 4.5% to 4.75%. The decision marked the eighth consecutive increase in the rate, although the committee’s more recent rate hikes have ranged from 50 to 75 basis points.
In a statement, the FOMC noted inflation had eased somewhat “but remains elevated.” It cautioned that committee members anticipate that further rate hikes will be needed to lower inflation to the Fed’s 2% target range.
Fed Chairman Jerome Powell said in a news conference that he does not expect the FOMC to lower rates this year. “Our focus is not on short-term moves but on sustained changes to broader financial conditions,” Powell said. “And it is our judgment that we’re not yet at a sufficiently restrictive policy stance, which is why we say that we expect ongoing hikes will be appropriate.”
Powell added he was optimistic that inflation could be brought under control without significant economic pain. “My base case is that the economy can return to 2% inflation without a really significant downturn or a really big increase in unemployment,” he said. “I think that’s a possible outcome. I think many forecasters would say it’s not the most likely outcome, but I would say there’s a chance.” The FOMC meets again March 21-22.
