The Fed as expected raises rates by 25 basis points.

in fed •  2 years ago 

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Interestingly their March projections aren't much different than their December projections. Mostly the same expectations for GDP growth, unemployment, and inflation. Notably the terminal Fed Funds rate is unchanged at 5.1%. After today's rate hike we are now at a target rate of 4.75-5%, so we are nearly there.

I noted previously that the banking crisis will likely cause some implicit tightening as banks reduce lending. As noted in the FOMC statement, this implicit tightening will likely offset the inflation pressures, which is probably why the projections are not significantly different than December's forecast.

Also noted in the statement, the Fed is still committed to Quantitative Tightening (QT). I see a lot of people posting the recent change in the Fed's balance sheet. But note this is generally banks using the discount window. This is different than QE which involved asset purchases. Discount window lending gets repaid within 90 days. The other growth in the Fed balance sheet is likewise temporary- credit extended to the banks in receivership, which will be recouped as the banks exit the receivership.

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