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Timely and Relevant News: Federal Reserve Meeting Recap: We Have Liftoff
The Federal Reserve (Fed) ended its two-day Federal Open Market Committee (FOMC) meeting on Wednesday, March 16th and as expected, the Committee voted to increase the fed funds rate by 25 basis points (0.25%) and signaled further rate increases are appropriate. This was the first rate hike since 2018.
“While the rate hike was expected, the revised dot plot showed the Committee is serious about bringing inflationary pressures back down,” noted LPL Financial Fixed Income Strategist Lawrence Gillum. “The Fed’s job, especially from this point forward though, is to prove that it can manage the removal of monetary accommodation without slowing the economy too much. It’s a tall order given the number of expected interest rate hikes this year.”
Below is the “dot plot”, which provides the individual Fed member’s projections on the future path of interest rates. The median dot of the Committee reflects seven interest rate hikes in 2022; up from three hikes three months ago.
During the press conference Fed Chairman Jerome Powell mentioned that each meeting was “live” and a 50 basis point hike could be appropriate, depending on the path of inflationary pressures. Interestingly, the Committee expects to hike interest rates above its long-term neutral rate in 2023, holding rates steady in 2024 and then cutting rates thereafter.
Fed updates its economic projections four times a year for the next several years as well as its longer-term forecasts. The Fed now sees 2.8% GDP growth in 2022 (
down from 4.0% in December) and higher inflation expectations. The Committee sees inflation falling back to 2.7% headline and 2.6% core in 2023.
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This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
All index data from FactSet and MarketWatch.
This Research material was prepared by LPL Financial, LLC.