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Essentials of Monetary Policy

The Fed Slows Rate Hikes Again

February 1, 2023
Francis Généreux
Principal Economist

The Committee decided to raise the target range for the federal funds rate by 0.25%. It is now in a range of 4.50% to 4.75%.

The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time. In determining the extent of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.

The Fed acknowledged that inflation is improving, but not enough to pause rate increases, especially given the resilient labour market. Expect more 25bp hikes over the next few meetings until the economy shows more signs of cooling.

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