Federal Reserve — FOMC Statement (USA, 2022)

Minutes of the Federal Open Market Committee December 13 14, 2022 A joint meeting of the Federal Open Market Committee and the Board of Governors of the Federal Reserve Sys- tem was held in the offices of the Board of Governors on Tuesday, December 13, 2022, at 10:00 a.m. and con- tinued on Wednesday, December 14, 2022, at 9:00 a.m.1 Attendance Jerome H. Powell, Chair John C. Williams, Vice Chair Michael S. Barr Michelle W. Bowman Lael Brainard James Bullard Susan M. Collins Lisa D. Cook Esther L. George Philip N. Jefferson Loretta J. Mester Christopher J. Waller Charles L. Evans, Patrick Harker, Neel Kashkari, Lorie K. Logan, and Helen E. Mucciolo, Alternate Members of the Committee Thomas I. Barkin, Raphael W. Bostic, and Mary C. Daly, Presidents of the Federal Reserve Banks of Richmond, Atlanta, and San Francisco, respectively James A. Clouse, Secretary Matthew M. Luecke, Deputy Secretary Brian J. Bonis, Assistant Secretary Michelle A. Smith, Assistant Secretary Mark E. Van Der Weide, General Counsel Richard Ostrander, Deputy General Counsel Trevor A. Reeve, Economist Stacey Tevlin, Economist Beth Anne Wilson, Economist Shaghil Ahmed, Carlos Garriga, Joseph W. Gruber, and William Wascher, Associate Economists David Altig, Executive Vice President, Federal Reserve Bank of Atlanta Roc Armenter, Vice President, Federal Reserve Bank of Philadelphia Kartik B. Athreya, Executive Vice President, Federal Reserve Bank of Richmond Penelope A. Beattie, Section Chief, Office of the Secretary, Board Daniel O. Beltran, Deputy Associate Director, Division of International Finance, Board Ellen J. Bromagen, First Vice President, Federal Reserve Bank of Chicago Jennifer J. Burns, Deputy Director, Division of Supervision and Regulation, Board Mark A. Carlson, Adviser, Division of Monetary Affairs, Board Todd E. Clark, Senior Vice President, Federal Reserve Bank of Cleveland Stephanie E. Curcuru, Deputy Director, Division of International Finance, Board Navtej S. Dhillon, Special Adviser to the Board, Division of Board Members, Board Burcu Duygan-Bump, Special Adviser to the Board, Division of Board Members, Board Rochelle M. Edge, Deputy Director, Division of Monetary Affairs, Board Matthew J. Eichner,2 Director, Division of Reserve Bank Operations and Payment Systems, Board Eric M. Engen, Senior Associate Director, Division of Patricia Zobel, Manager pro tem, System Open Market Research and Statistics, Board Account Eric C. Engstrom, Associate Director, Division of Jose Acosta, Senior Communications Analyst, Division Monetary Affairs, Board of Information Technology, Board 1 The Federal Open Market Committee is referenced as the  FOMC  and the  Committee  in these minutes; the Board of Governors of the Federal Reserve System is referenced as the  Board  in these minutes. 2 Attended through the discussion of developments in finan- cial markets and open market operations. Page 1_____________________________________________________________________________________________ Jon Faust, Senior Special Adviser to the Chair, Division Ann E. Misback, Secretary, Office of the Secretary, of Board Members, Board Board Glenn Follette, Associate Director, Division of Raven Molloy, Deputy Associate Director, Division of Research and Statistics, Board Research and Statistics, Board Joshua Gallin, Senior Special Adviser to the Chair, Norman J. Morin, Deputy Associate Director, Division Division of Board Members, Board of Research and Statistics, Board Jonathan E. Goldberg, Principal Economist, Division Michelle M. Neal, Head of Markets, Federal Reserve of Monetary Affairs, Board Bank of New York Erik A. Heitfield, Deputy Associate Director, Division Giovanni Nicol , Senior Economist, Division of of Research and Statistics, Board Monetary Affairs, Board Valerie S. Hinojosa, Section Chief, Division of Anna Nordstrom, Capital Markets Trading Head, Monetary Affairs, Board Federal Reserve Bank of New York Jane E. Ihrig, Special Adviser to the Board, Division of Marcelo Ochoa,3 Principal Economist, Division of Board Members, Board Monetary Affairs, Board Benjamin K. Johannsen, Section Chief, Division of Giovanni Olivei, Senior Vice President, Federal Monetary Affairs, Board Reserve Bank of Boston Michael T. Kiley, Deputy Director, Division of Anna Paulson, Executive Vice President, Federal Financial Stability, Board Reserve Bank of Chicago Don H. Kim, Senior Adviser, Division of Monetary Andrea Raffo, Senior Vice President, Federal Reserve Affairs, Board Bank of Minneapolis Elizabeth K. Kiser, Associate Director, Division of Linda Robertson, Assistant to the Board, Division of Research and Statistics, Board Board Members, Board Sylvain Leduc, Executive Vice President, Federal Achilles Sangster II, Senior Information Manager, Reserve Bank of San Francisco Division of Monetary Affairs, Board Andreas Lehnert, Director, Division of Financial Stability, Board Anthony Sarver, Senior Financial Institution and Policy Analyst, Division of Monetary Affairs, Board Paul Lengermann, Assistant Director, Division of Research and Statistics, Board John W. Schindler,4 Senior Associate Director, Division of Financial Stability, Board Eric LeSueur,2 Policy and Market Monitoring Advisor, Samuel Schulhofer-Wohl, Senior Vice President, Federal Reserve Bank of New York Federal Reserve Bank of Dallas Kurt F. Lewis, Special Adviser to the Board, Division of Board Members, Board Seth Searls,2 Policy and Market Monitoring Associate Director, Federal Reserve Bank of New York Laura Lipscomb, Special Adviser to the Board, Nitish Ranjan Sinha, Special Adviser to the Board, Division of Board Members, Board Division of Board Members, Board David L pez-Salido, Senior Associate Director, Division of Monetary Affairs, Board Clara Vega, Special Adviser to the Board, Division of Board Members, Board Jonathan P. McCarthy, Economic Research Advisor, Annette Vissing-J rgensen, Senior Adviser, Division of Federal Reserve Bank of New York Monetary Affairs, Board 3 Attended Tuesday s session only. 4 Attended opening remarks for Tuesday s session only. Page 2Federal Open Market Committee_____________________________________________________________________________________________ Jeffrey D. Walker,2 Associate Director, Division of Reserve Bank Operations and Payment Systems, Board Min Wei, Senior Associate Director, Division of Monetary Affairs, Board Paul R. Wood, Special Adviser to the Board, Division of Board Members, Board Rebecca Zarutskie, Special Adviser to the Board, Division of Board Members, Board Selection of Committee Officer By unanimous vote, the Committee selected Richard Ostrander to serve as deputy general counsel, effective December 13, 2022, until the first regularly scheduled meeting of the Committee in 2023. Developments in Financial Markets and Open Market Operations The manager pro tem turned first to a discussion of de- velopments in financial markets. Following several months of tightening, financial conditions eased over the period as investor concerns about global risks edged lower and incoming data showed nascent signs of a moderation in inflationary pressures. Central bank com- munications signaling a slower pace of policy rate in- creases appeared to contribute to improved sentiment. Measures of implied volatility across financial markets declined somewhat from the elevated levels observed in October. Consistent with the decline in volatility, model-based measures suggested that a drop in term premiums accounted for much of the decline in Treasury yields over the period. Equity markets moved higher. However, equity market contacts noted risks to growth ahead, and earnings expectations for coming quarters had been marked down. In foreign exchange markets, moderating concerns about the potential for highly ele- vated U.S. interest rates spurred a depreciation in the foreign exchange value of the dollar. In other market developments, the manager pro tem noted the failure of a prominent crypto-asset exchange. While the spillovers from this situation had been significant among other crypto lenders and exchanges, the collapse was not seen as posing broader market risks to the financial system. Regarding the outlook for inflation in the United States, inflation compensation implied by Treasury Inflation Protected Securities declined over the period, respond- ing to lower-than-expected consumer price index (CPI) data and a sizable drop in oil prices. However, the Desk survey-based measures of inflation expectations were lit- tle changed from the prior survey, suggesting that falling inflation risk premiums may have contributed to the moves. Both market- and survey-based measures con- tinued to point to expectations for a moderation of in- flation over the coming year. Regarding the outlook for monetary policy, both mar- ket- and Desk survey-based measures indicated expecta- tions for the Committee to maintain elevated policy rates through 2023. In the December survey, the median re- spondent s modal expectation for the path of the federal funds rate in 2023 shifted higher by 25 basis points rela- tive to the November survey. The survey-based estimate of the expected policy path in 2024 continued to suggest a decline in the target range for the federal funds rate over 2024, little changed from the path anticipated in the November survey. In contrast, the market-implied path of the federal funds rate in 2024 shifted down by as much as   percentage point over the peri