FOMC Press Conference, December 14, 2022

TL;DR

The FOMC raised the federal funds rate target by ½ percentage point to 4¼–4½ percent and anticipated further increases to bring inflation back to 2 percent. Powell said the restrictive stance would likely need to remain for some time as inflation stayed elevated, the economy slowed, and labor demand exceeded worker supply. Read on for the conference’s specific inflation, growth, employment, and rate projections.

Transcript

December 14, 2022 Chair Powell's Press Conference FINAL Page 1 of 23 Transcript of Chair Powell's Press Conference December 14, 2022 CHAIR POWELL. Good afternoon. Before I go into the details of today's meeting, I would like to underscore for the American people that we understand the hardship that high inflation is causing and that we are strongly... Read More

Key Insights

• ✋ The FOMC is strongly committed to bringing high inflation down to the 2 percent target.
• ☠️ While the labor market remains tight, inflation remains a concern, and the FOMC expects ongoing rate hikes to be appropriate.
• 🧑‍⚕️ The Fed acknowledges the structural labor shortage in the economy, with vacancies exceeding the supply of available workers.
• 🐢 The projected slow growth and tightening monetary policy indicate the Fed's determination to restore price stability and address inflationary pressures.

Questions & Answers

Q: What did the FOMC announce at its December 14, 2022 press conference?

The FOMC raised the federal funds rate target range by ½ percentage point to 4¼–4½ percent. It also continued significantly reducing the size of its balance sheet and anticipated that ongoing rate increases would be appropriate.

Q: How did the FOMC plan to bring inflation down to its 2 percent goal?

The Committee planned to move monetary policy to a sufficiently restrictive stance through ongoing increases in the federal funds rate target range. Powell said restoring price stability would likely require maintaining restrictive policy for some time.

Q: How much had the Federal Reserve raised interest rates during 2022?

Including the December action, the Federal Reserve had raised interest rates by 4¼ percentage points during the year. Powell noted that the full effects of this rapid tightening had yet to be felt.

Q: What inflation figures did Powell report?

Total PCE prices rose 6 percent over the 12 months ending in October, while core PCE prices rose 5 percent. In November, the 12-month CPI change was 7.1 percent and the core CPI change was 6 percent.

Q: Was inflation clearly on a sustained downward path?

Powell called the reduction in the monthly pace of price increases during October and November welcome. However, he said substantially more evidence was needed before the Fed could be confident that inflation was on a sustained downward path.

Q: What were the FOMC’s economic growth projections?

The median projection for real GDP growth was 0.5 percent for both 2022 and 2023. Powell said this was well below the median estimate of the longer-run normal growth rate.

Q: How did Powell describe the labor market?

Powell described the labor market as extremely tight, with unemployment near a 50-year low, job vacancies still very high, and elevated wage growth. Employment had increased by an average of 272,000 jobs per month over the previous three months, while demand for workers substantially exceeded supply.

Q: What were the FOMC’s projections for unemployment and inflation?

The median projection put unemployment at 4.6 percent at the end of 2023. Median total PCE inflation was projected at 5.6 percent in 2022, 3.1 percent in 2023, 2.5 percent in 2024, and 2.1 percent in 2025.

Summary & Key Takeaways

• The FOMC raised the policy interest rate by ½ percentage point, with ongoing increases anticipated to attain a sufficiently restrictive monetary policy stance.

• The U.S. economy has slowed, with modest growth of spending and production, weakened activity in the housing sector, and slower output growth affecting business fixed investment.

• Despite a tight labor market, high inflation remains a concern, with total PCE prices rising 6 percent and core PCE prices rising 5 percent over the past 12 months.