As Expected, Fed Boosts Rates by Quarter-Point; Here's What 1 CU Economist is Saying

WASHINGTON–As widely expected, the Federal Reserve has approved a quarter-point hike in rates and indicated more will follow.

“Recent indicators point to modest growth in spending and production. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation has eased somewhat but remains elevated,” the Fed said in a statement accompanying the increase. “Russia's war against Ukraine is causing tremendous human and economic hardship and is contributing to elevated global uncertainty. The Committee is highly attentive to inflation risks.”

Pointing to its fundamental goals of achieving maximum employment and inflation at the rate of 2% over the longer run, the Federal Open Market Committee said it is raising the target range for the federal funds rate 4.5%-4.75%. 

“The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time,” the Fed said. “In determining the extent of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans. The Committee is strongly committed to returning inflation to its 2% objective.”

NAFCU: Additional Hikes Likely

“The FOMC raised rates once again and signaled that more hikes are in store. In stating that it continues to anticipate ongoing increases in the Fed funds rate to be necessary in order to tame inflation, the Committee is suggesting that several additional hikes are likely. The Committee appears committed to raising the fed funds rate above 5 percent, consistent with its December projection," said NAFCU Chief Economist and Vice President of Research Curt Long

Continuing to Monitor

With the economy slowing and inflation cooling, the FOMC said it will continue to monitor the implications of incoming information for the economic outlook. 

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Lael Brainard; Lisa D. Cook; Austan D. Goolsbee; Patrick Harker; Philip N. Jefferson; Neel Kashkari; Lorie K. Logan; and Christopher J. Waller.

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