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Essentials of Monetary Policy

The Federal Reserve Starts Slowing Rate Hikes

December 14, 2022
Francis Généreux
Principal Economist

The Federal Reserve (Fed) decided to raise the target range for the federal funds rate by 0.50%. It is now in a range of 4.25% to 4.50%. The Fed anticipates that ongoing increases in the target range will be appropriate. In determining the pace of future increases in the target range, the Fed 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 remains committed to taming inflation. It slowed the pace of rate hikes, but still doesn’t think monetary policy is restrictive enough. That means more rate hikes are coming. The labour market will need to show additional signs of slowing before the Fed slows the pace of tightening again.

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