Federal Reserve — FOMC Statement (USA, 2022)

Minutes of the Federal Open Market Committee March 15 16, 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, March 15, 2022, at 9:00 a.m. and continued on Wednesday, March 16, 2022, at 9:00 a.m.1 Attendance Jerome H. Powell, Chair John C. Williams, Vice Chair Michelle W. Bowman Lael Brainard James Bullard Esther L. George Loretta J. Mester Christopher J. Waller Meredith Black, Charles L. Evans, Patrick Harker, Naureen Hassan, and Neel Kashkari, 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 Kenneth C. Montgomery, Interim President of the Federal Reserve Bank of Boston 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 Michael Held, Deputy General Counsel Trevor A. Reeve, Economist Stacey Tevlin, Economist Beth Anne Wilson, Economist Shaghil Ahmed, Brian M. Doyle, Carlos Garriga, Joseph W. Gruber, David E. Lebow, and William Wascher, Associate Economists Lorie K. Logan, Manager, System Open Market Account Patricia Zobel, Deputy Manager, System Open Market Account Ann E. Misback, Secretary, Office of the Secretary, Board Matthew J. Eichner,2 Director, Division of Reserve Bank Operations and Payment Systems, Board; Michael S. Gibson, Director, Division of Supervision and Regulation, Board; Andreas Lehnert, Director, Division of Financial Stability, Board Daniel M. Covitz, Deputy Director, Division of Research and Statistics, Board; Sally Davies, Deputy Director, Division of International Finance, Board; Rochelle M. Edge, Deputy Director, Division of Monetary Affairs, Board; Michael T. Kiley, Deputy Director, Division of Financial Stability, Board Jon Faust and Joshua Gallin, Senior Special Advisers to the Chair, Division of Board Members, Board Antulio N. Bomfim, Jane E. Ihrig, Kurt F. Lewis, and Nitish R. Sinha, Special Advisers to the Board, Division of Board Members, Board Linda Robertson, Assistant to the Board, Division of Board Members, Board David Bowman, David L pez-Salido, and Min Wei, Senior Associate Directors, Division of Monetary Affairs, Board Edward Nelson, Senior Adviser, Division of Monetary Affairs, Board; Jeremy B. Rudd, Senior Adviser, Division of Research and Statistics, Board Stephanie E. Curcuru and Matteo Iacoviello,3 Associate Directors, Division of International Finance, Board; Burcu Duygan-Bump, Associate Director, Division of Research and Statistics, Board; Jeffrey 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 plans for reducing the size of the balance sheet. 3 Attended through the staff review of the economic and fi- nancial situation. Page 1_____________________________________________________________________________________________ D. Walker,2 Associate Director, Division of Reserve Bank Operations and Payment Systems, Board Zeynep Senyuz and Rebecca Zarutskie, Deputy Associate Directors, Division of Monetary Affairs, Board Paul Lengermann and Clara Vega, Assistant Directors, Division of Research and Statistics, Board; Dan Li, Assistant Director, Division of Monetary Affairs, Board Alyssa G. Anderson,2 Valerie S. Hinojosa, and Lubomir Petrasek,2 Section Chiefs, Division of Monetary Affairs, Board; Penelope A. Beattie,2 Section Chief, Office of the Secretary, Board; Logan T. Lewis,3 Section Chief, Division of International Finance, Board David H. Small, Project Manager, Division of Monetary Affairs, Board Mary Tian2 and Randall A. Williams, Group Managers, Division of Monetary Affairs, Board Michele Cavallo and Ander Perez-Orive, Principal Economists, Division of Monetary Affairs, Board Cynthia L. Doniger and David Glancy,4 Senior Economists, Division of Monetary Affairs, Board David Na,2 Senior Financial Institution and Policy Analyst, Division of Monetary Affairs, Board Jose Acosta, Senior Communications Analyst, Division of Information Technology, Board Kelly J. Dubbert, First Vice President, Federal Reserve Bank of Kansas City Kartik B. Athreya, Michael Dotsey, and Sylvain Leduc, Executive Vice Presidents, Federal Reserve Banks of Richmond, Philadelphia, and San Francisco, respectively Edward S. Knotek II, Anna Nordstrom,2 Giovanni Olivei, and Mark L.J. Wright, Senior Vice Presidents, Federal Reserve Banks of Cleveland, New York, Boston, and Minneapolis, respectively 4 Attended Tuesday s session only. Kathryn B. Chen, Lisa Chung,2 Jonas Fisher, Mark J. Jensen, Matthew D. Raskin, Andrea Tambalotti, and Benedict Wensley,2 Vice Presidents, Federal Reserve Banks of New York, New York, Chicago, Atlanta, New York, New York, and New York, respectively Seth Searls,2 Assistant Vice President, Federal Reserve Bank of New York Karel Mertens, Senior Economic Policy Advisor, Federal Reserve Bank of Dallas Justin Meyer,2 Markets Officer, Federal Reserve Bank of New York Developments in Financial Markets and Open Market Operations The manager turned first to a review of global financial market developments. Following the Russian invasion of Ukraine and the subsequent imposition of an array of sanctions, the ruble depreciated roughly 40 percent against the dollar. Prices of dollar-denominated Russian bonds plunged 80 to 90 percent, and local trading of Russian equities was suspended after a precipitous de- cline in Russian stock price indexes. Global financial conditions tightened, reflecting declines in equity prices, increases in sovereign yields and credit spreads, and  for the United States an appreciation of the dollar. Prices of commodities that Russia exports, particularly oil and natural gas, soared over the period. While oil prices partially retraced late in the period, options prices suggested considerable probability that oil prices could remain elevated or rise further in the months ahead. Alongside the rise in commodities prices, measures of near-term inflation compensation increased sharply across advanced economies. In Eastern European countries, currencies depreciated notably and equity prices declined, but most emerging market currencies outside of Eastern Europe depreciated only modestly or rose. Sovereign spreads for emerging market economies (EMEs) widened, but the moves outside of Eastern Eu- rope were relatively modest. The developments in Ukraine sparked some liquidity strains across markets. Overnight interest rates were steady throughout the period, but there were some signs of pressures in term funding markets. High levels of re- serves in the banking system and the backstop facilities Page 2Federal Open Market Committee_____________________________________________________________________________________________ in place the new repurchase agreement facility for for- eign and international monetary authorities (FIMA Repo Facility) and the standing repo facility (SRF), as well as the standing central bank liquidity swap lines and the dis- count window likely supported market confidence re- garding the availability of liquidity and helped contain funding pressures. Amid a rise in market volatility, trad- ing liquidity declined across a number of sectors. In the Treasury market, market depth fell and the price impact of trades increased modestly in some sectors. Overall, however, volumes were typical, and markets continued to function in an orderly fashion. Notwithstanding uncertainties associated with geopolit- ical developments, many central banks continued to sig- nal intentions to move ahead with reducing policy ac- commodation to address elevated inflation. Market- implied policy rates one year forward rose notably across many advanced foreign economies (AFEs), extending increases seen over recent months. In the United States, incoming economic data and Fed- eral Reserve communications led investors to expect a more rapid removal of policy accommodation than they had previously expected. Market participants almost universally expected a 25 basis point increase in the tar- get range for the federal funds rate at the current meet- ing. Moreover, futures prices implied that the federal funds rate would increase around 170 basis points through year-end, about 70 basis points more than had been priced in at the time of the January meeting. Simi- larly, the median projection of the target range for the federal funds rate in the Open Market Desk s most re- cent surveys of primary dealers and market participants showed an increase of 150 basis points this year. The median projected path for the target range beyond 2022 rose another 100 basis points by the first half of 2024 to a level modestly above the median projected longer-run level before returning closer to the longer-run level in 2025. Consistent with shifting expectations for the path of policy, shorter-dated Treasury yields rose notably over the intermeeting period and the spread between the 10-year Treasury yield and 2-year Treasury yield nar- rowed. Market participants expected an earlier and somewhat faster reduction in System Open Market Account (SOMA) holdings of securities than they did in January. In the Desk surveys