Watch FOMC Rewind: What the Fed’s September 2022 Policy Decision Means for You
The Federal Open Market Committee (FOMC) raised the target range for its short-term policy rate, the federal funds rate, 0.75 percentage points at its September meeting, and said it anticipates that ongoing increases in the target range will be appropriate.
In its meeting statement, the FOMC reiterated that inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures. It said Russia’s war against Ukraine and related events are creating additional upward pressure on inflation and are weighing on global economic activity.
In addition to raising the policy rate, the FOMC said it will continue reducing its holdings of Treasury securities, agency debt, and agency mortgage-backed securities as described in the Plans for Reducing the Size of the Federal Reserve’s Balance Sheet. The policy statement also reaffirmed that the FOMC is highly attentive to inflation risks and strongly committed to returning inflation to its 2 percent objective.
The FOMC said it will continue to monitor incoming information to assess the appropriate stance of monetary policy and will be prepared to adjust the stance as appropriate if risks emerge. The FOMC will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
What does this mean for you? Let’s rewind.
September 2022 FOMC Rewind
Marie: Hey Gus, what’s up at the Fed?
Gus: Unfortunately, inflation is what’s up.
Marie: Ouch! Yeah, I’m definitely feeling the higher prices.
Gus: Me too! And the Fed is hearing that from all over.
Marie: What’s the Fed’s plan?
Gus: They raised interest rates another 3/4 percentage point to work toward the big goal, stable prices.
Marie: How do interest rates help?
Gus: Well, raising rates makes people less likely to buy big-ticket items.
Gus: In the big picture, that helps demand be more in line with supply, which should bring down inflation.
Marie: What else is the Fed looking at?
Gus: Well, the job market is out of balance and that’s also affecting inflation.
Gus: There are twice as many jobs open as there are workers to fill them.
Marie: I thought having a lot of job options was all good.
Gus: It is good for people who want a job.
Gus: But it’s another reason supply can’t keep up with demand since businesses aren’t fully staffed.
Marie: Oh, I get it, and that can lead to higher prices?
Gus: Exactly! So the Fed is trying to find the right balance.
Marie: Cool, thanks for shedding some light on that.
Gus: Any time!
You may also be interested in:
- 60-Second Explainer: How the Fed Helps Lower Inflation
- Will Workers Demand Cost-of-Living Adjustments?
- How Much Do Supply and Demand Drive Inflation?
- Chair Powell’s FOMC Press Conference
The views expressed here do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco or of the Board of Governors of the Federal Reserve System.