The US Federal Reserve (Fed) announced its June monetary policy resolution at 2:00 am Taiwan time on Thursday (16th), raising the target range of the federal funds rate (FFR) by 3 yards (75 basis points) to 1.50-1.75%. And continue to shrink the balance sheet.
The following is the statement from the Fed’s June meeting, with wording differences compared to the statement from the last May meeting:
Overall economic activity fell in the first quarter,It seems to have started to accelerateemployment growth has been robust in recent months,Unemployment remains low. Inflation remains high, reflecting supply-demand imbalances related to the pandemic, higher energy prices and widespread price pressures.
“The May statement said: Household spending and business fixed investment remained strong despite a slowdown in overall economic activity in the first quarter. Employment growth has been robust in recent months, and unemployment has fallen sharply. Inflation remains high, reflecting pandemic-related supply and demand imbalances, higher energy prices and widespread price pressures.”
The Russian aggression against Ukraine has resulted in enormous humanitarian and economic suffering. Aggression and related events put additional upward pressure on inflation,and suppress global economic activity. Additionally, Covid-related lockdowns in China could exacerbate supply chain disruptions. The Committee is highly concerned about inflation risks.
“The May statement said: Russia’s aggression in Ukraine has resulted in enormous humanitarian and economic suffering. The impact on the U.S. economy is highly uncertain, with the aggression and related events putting additional upward pressure on inflation and potentially depressing economic activity. In addition , China’s Covid-related lockdowns could exacerbate supply chain disruptions. The Committee is highly concerned about inflation risks.”
The committee seeks to achieve full employment and a longer-term inflation rate of 2%. In support of these goals, the committee decided to raise the target range for the federal funds rate to 1.50% to 1.75%, anticipating that further increases in the target range would be appropriate.
“The May statement said: The Committee seeks to achieve full employment and a longer-term inflation rate of 2%. With an appropriate monetary policy stance, the Committee expects inflation to return to the 2% target and the labor market to remain strong. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 0.75% to 1% and anticipated that further increases in the target range would be appropriate.”
In addition, the committeewill continue to reduce its holdings of Treasuries, agency debt and agency mortgage-backed securitiesas described in the “Federal Reserve Balance Sheet Reduction Plan” released in May.The committee has made a strong commitment to bring inflation back to its 2 percent target.
“…Committee decided to reduce its holdings of Treasuries, agency debt and agency mortgage-backed securities beginning June 1…”
“The May statement did not say ‘the Committee is strongly committed to returning inflation to its 2 percent target.'”
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of subsequent information for the economic outlook and will be prepared to adjust the stance of monetary policy as appropriate if risks arise that could hinder the Committee’s achievement of its objectives. The committee’s assessment will take into account a wide range of information, including public health data, labor market conditions, indicators of inflation pressures and inflation expectations, and data on financial and international developments.
Supporting this monetary policy decision are FOMC Chairman Powell (Jerome Powell), Vice Chairman John Williams (John Williams), Bowman (Michelle Bowman), Brainard (Lael Brainard), Bullard (James Bullard) ,Lisa CookPatrick Harker,Philip JeffersonLoretta Mester and Christopher Waller.Esther George opposed the resolution, supporting a 0.5 percentage point increase to 1.25-1.50%.Harker is a proxy voting member for this meeting.
“This meeting adds two new members, Cook and Jefferson. George supports the monetary policy resolution at the meeting in May.”