Federal Reserve Press Releases: 0.25% increase in fed funds rate

The Federal Reserve announced a 0.25% raise in the fed funds rate today. As I predicted in Sunday’s Control Panel, the market responded with a gleeful pop even though this tapering of the speed of Fed raises was expected for several weeks. Even though the Fed will continue raising rates even if they slow the pace. And they have no mention of cutting the fed funds rate in 2023.

February 01, 2023

Federal Reserve issues FOMC statement

The Committee is highly attentive to inflation risks.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 4-1/2 to 4-3/4 percent. The Committee anticipates that 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 percent over time. …

In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans. [This will raise the yield of longer-term bonds. – W] The Committee is strongly committed to returning inflation to its 2 percent objective. [This is a clear cautionary message to the economists and speculators who are betting that the Fed will be OK with a 3% inflation rate and back down their fed funds strategy if a recession occurs. - W]

February 01, 2023

Federal Open Market Committee reaffirms its “Statement on Longer-Run Goals and Monetary Policy Strategy”

Statement on Longer-Run Goals and Monetary Policy Strategy
Adopted effective January 24, 2012; as reaffirmed effective January 31, 2023
The Federal Open Market Committee (FOMC)
is firmly committed to fulfilling its statutory
mandate from the Congress of promoting maxi-
mum employment, stable prices, and moderate
long-term interest rates. [end quote]

The Fed reaffirmed its mandate and did not change a single word. Using appropriate gravitas, they are smacking the market upside the head with the message that they will hang tough.
Maximum employment commensurate with
Stable prices (no, we aren’t near stable yet!) and
Moderate long-term interest rates (no, not decades of negative real yields!).

That determination is a huge trend change. The market doesn’t believe the Fed will actually execute this mandate once a recession begins and economists/ speculators/ politicians start heavy pressure to cut rates.



As I expected, they’ve dropped from .75 (4 times) to .5 (once) to .25, showing that they believe inflation is, if not ended, at least well defensed. (They would have been better to go 3 at .75, 2 at .50 and cruise more smoothly into .25, but I think they were panicking.)

I would expect a couple more .25s, just because with inflation you can’t really be sure until all the cows are in the pen, toi grossly mix metaphors. Now they’re in the land of a few minor bumps and then flatland for the rest of the year

No, I don’t expect them to reverse anytime soon, but with the economy doing OK, employment doing well, and a few remaining pockets of inflation showing signs (not completed) of abating, I would say the US is in good shape.

Absent energy spikes, war, or other multicolored swans, of course.


It wont be much of a recession. The FED will hold interest rates at some level commensurate with the needs of the banking systems to normalize bank deposits being lent to healthy borrowers. The idea being a normalization of the banking system. The difference is in the FF will be more bound to the overall loan risks in the economy going forward. The measurement of the FOMC buying and selling of paper will be in relation to the stated reserve requirements for banks.

About as close as I can get to an Alan Greenspan interpretation.

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There’s very likely going to be one or two more 0.25 increases, but keep in mind that this time there is longer period of time between fed meetings, nearly 2 months!