January 31, 2023

FOMC expected to slow down pace of rate hikes

Federal Reserve The Federal Open Market Committee (FOMC) – the Fed’s monetary-policy setting arm – begins its first meeting of 2023 today and is expected to raise rates another 25 basis points. 

During the previous FOMC meeting, the committee raised rates 50 basis points to a range of 4.25 to 4.5 percent – breaking a streak of four consecutive 75 basis point hikes. The minutes from the December meeting also revealed that multiple participants raised their assessment of the appropriate path of the federal funds rate relative to their assessment at previous meetings.

NAFCU Chief Economist and Vice President of Research Curt Long believes the Fed will issue one more 25 basis point hike in March, then pause on hikes before potential cuts later this year. Long also noted that wage growth, inflation, and unemployment numbers will contribute to decisions later in the year.

On the latest Gross Domestic Product (GDP) figures, Long told CNBC that much of the 2.9 percent growth was “concentrated in inventory build, which is unlikely to grow at a similar pace in 2023. Nevertheless, with resilient consumer spending, low unemployment claims, and receding inflation, some of the clouds that were forming over the economy several months ago are beginning to clear.”

NAFCU will monitor the FOMC meeting and provide analysis after it concludes tomorrow. Access the latest economic updates from NAFCU's award-winning research team.