Expectations are the FOMC will announce a 25bp rate increase in the federal funds rate and analysts will be looking for any mention of a possible pause in rate hikes at the March FOMC meeting.
We expect Chair Powell to continue to emphasize that a slower pace of rate hikes does not signal the Fed’s job is over. … the decision may be for a smaller 25bp hike, but the Fed will want to avoid the interpretation that this implies a lower terminal rate or an earlier onset of rate cuts than the committee viewed as appropriate when it last met in December. That means no change in policy rate guidance in the FOMC statement. We think the statement will continue to say that “ongoing increases in the target range [for the federal funds rate] will be appropriate.” A softening in this language could lead to an undesired easing in financial conditions.”
The unemployment rate was at 3.5% in December. This put the Q4 rate at 3.6%, slightly lower than the FOMC projection.
As of December 2022, PCE inflation was up 5.0% from December 2021. On a Q4-over-Q4 basis PCE inflation was up 5.5% in Q4 2022. This was below the FOMC projection.
PCE core inflation was up 4.4% in December year-over-year. On a Q4-over-Q4 basis core PCE inflation was up 4.7% in Q4 2022. This was at the bottom of the FOMC projection range.
Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents, Core Inflation1 Projection Date2022202320242025Dec 20224.7 to 4.83.2 to 3.72.3 to 2.72.0 to 2.2