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The Federal Reserve Open Market Committee voted to raise the federal funds target rate by 25 basis points to a target range of 4.5% to 4.75%. The latest rate hike pulls back from the 50-basis-point hike in December and represents its eighth overall increase as part of the Federal Reserve’s continued efforts to cool inflation.

According to the Federal Reserve’s monetary policy committee, recent indicators point to “modest growth” in spending and production, “robust” job gains in recent months, and a low unemployment rate. Inflation, while still elevated, has eased somewhat over the past several months. The annual inflation rate for the 12 months ended December 2022 was 6.5%, a decrease from 7.1% during November 2022. However, inflation levels remain elevated above the Federal Reserve’s target rate of 2%.

“The most recent Federal Reserve Open Market Committee meeting confirmed that the Fed is steadfast in their plan to quell inflation and will stick with it until the job is done,” says Nik Scoolis, manager, housing economics, for Zonda. “While chairman Powell noted that some sectors are seeing signs of disinflation, the committee, as a whole, still expects two further hikes this year, unchanged from December. Overall, the Fed continues to foresee positive economic growth in 2023, but at a slower pace than in recent years.”

The Federal Reserve Open Market Committee anticipates 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% over time.” According to the committee, it is prepared to adjust the stance of monetary policy “as appropriate if risks emerge that could impede attainment of the committee’s goals.”