BOSTON, MA, March 16, 2022 – In a well telegraphed move, the Federal Open Market Committee (FOMC) of the Federal Reserve raised the federal funds rate by 0.25 percent today with one dissent (St. Louis Fed President James Bullard preferred to raise the rate by 0.5 percentage point). The fed funds rate now lands in the 0.25 to 0.50 percent range. The Committee “seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With appropriate firming in the stance of monetary policy, the Committee expects inflation to return to its 2 percent objective and the labor market to remain strong.” Given that the two main variables which the committee targets for setting monetary policy (employment and inflation) are either at their respective goal (employment) or higher (inflation), markets anticipate further increases in the fed funds rate this year. In addition, as expected, the FOMC announced that its quantitative easing program has ended and will begin reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities “at a coming meeting.” Finally, it is important to note that the uncertainty surrounding COVID-19 and the Ukraine situation and its impact to the U.S. economy, coupled with the continued vacancies of key Federal Reserve positions, leave the future path of monetary policy cloudy, albeit very much reliant on future data.

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