Federal Reserve — FOMC Statement (USA, 2022)

Minutes of the Federal Open Market Committee November 1 2, 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, November 1, 2022, at 10:30 a.m. and con- tinued on Wednesday, November 2, 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 Trevor A. Reeve, Economist Stacey Tevlin, Economist Beth Anne Wilson, Economist Shaghil Ahmed, Brian M. Doyle, Carlos Garriga, Joseph W. Gruber, David E. Lebow, Ellis W. Tallman, and William Wascher, Associate Economists Patricia Zobel, Manager pro tem, System Open Market Account Jose Acosta, Senior Communications Analyst, Division of Information Technology, Board Gene Amromin, Vice President, Federal Reserve Bank of Chicago Alyssa Arute,2 Manager, Division of Reserve Bank Operations and Payment Systems, Board Kartik B. Athreya, Executive Vice President, Federal Reserve Bank of Richmond Penelope A. Beattie, Section Chief, Office of the Secretary, Board James P. Bergin, Deputy General Counsel, Federal Reserve Bank of New York David Bowman, Senior Associate Director, Division of Monetary Affairs, Board Isabel Cair , Principal Economist, Division of Monetary Affairs, Board Mark A. Carlson, Adviser, Division of Monetary Affairs, Board Michele Cavallo, Principal Economist, Division of Monetary Affairs, Board Satyajit Chatterjee, Vice President, Federal Reserve Bank of Philadelphia Daniel Cooper, Vice President, Federal Reserve Bank of Boston Stephanie E. Curcuru, Deputy Director, Division of International Finance, Board Sally Davies,3 Senior Adviser, Division of International Finance, Board Burcu Duygan-Bump, Special Adviser to the Board, Division of Board Members, Board Rochelle M. Edge, Deputy Director, Division of Monetary Affairs, Board Eric M. Engen, Senior Associate Director, Division of Research and Statistics, 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. 3 Attended opening remarks for Tuesday session only. _____________________________________________________________________________________________Page 1 Eric C. Engstrom, Associate Director, Division of Monetary Affairs, Board Julie Ann Remache, Policy and Market Monitoring Head, Federal Reserve Bank of New York Jon Faust, Senior Special Adviser to the Chair, Division Linda Robertson, Assistant to the Board, Division of of Board Members, Board Board Members, Board Andrew Figura, Associate Director, Division of Argia M. Sbordone, Research Department Head, Research and Statistics, Board Federal Reserve Bank of New York Glenn Follette, Associate Director, Division of Samuel Schulhofer-Wohl, Senior Vice President, Research and Statistics, Board Federal Reserve Bank of Dallas Etienne Gagnon, Assistant Director, Division of Chiara Scotti, Special Adviser to the Board, Division of Monetary Affairs, Board Board Members, Board Joshua Gallin, Senior Special Adviser to the Chair, Seth Searls,2 Associate Director, Federal Reserve Bank Division of Board Members, Board of New York Michael S. Gibson, Director, Division of Supervision Nitish Ranjan Sinha, Special Adviser to the Board, and Regulation, Board Division of Board Members, Board David Glancy, Principal Economist, Division of Paul A. Smith, Deputy Associate Director, Division of Monetary Affairs, Board Research and Statistics, Board Valerie S. Hinojosa, Section Chief, Division of Gustavo A. Suarez, Assistant Director, Division of Monetary Affairs, Board Research and Statistics, Board Matteo Iacoviello, Senior Associate Director, Division Paula Tkac, Senior Vice President, Federal Reserve of International Finance, Board Bank of Atlanta Jane E. Ihrig, Special Adviser to the Board, Division of Jeffrey D. Walker,2 Associate Director, Division of Board Members, Board Michael T. Kiley, Deputy Director, Division of Financial Stability, Board Andreas Lehnert, Director, Division of Financial Stability, Board Kurt F. Lewis, Special Adviser to the Board, Division of Board Members, Board Laura Lipscomb, Special Adviser to the Board, Division of Board Members, Board Mark Meder, First Vice President, Federal Reserve Bank of Cleveland Ann E. Misback, Secretary, Office of the Secretary, Board Fernanda Nechio, Vice President, Federal Reserve Bank of San Francisco Edward Nelson, Senior Adviser, Division of Monetary Affairs, Board Michael G. Palumbo, Senior Associate Director, Division of Research and Statistics, Board Andrea Raffo, Senior Vice President, Federal Reserve Bank of Minneapolis Reserve Bank Operations and Payment Systems, Board Donielle A. Winford, Information Manager, 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 Committee Ethics Discussion The Chair began with a discussion of ethical standards and acknowledged the great privilege and heavy respon- sibility that come with being entrusted to make policy decisions. There was agreement that the Federal Re- serve can be effective only when there is a foundation of public trust. Participants reaffirmed the importance of holding themselves and their staffs accountable for knowing and following the high ethical standards that are set in the Committee s policies, including those on financial transactions and disclosure and on external communications. Developments in Financial Markets and Open Market Operations The manager pro tem turned first to a discussion of fi- nancial market developments in the United States. Over Page 2Federal Open Market Committee_____________________________________________________________________________________________ the period, financial conditions had tightened amid ele- vated volatility across financial markets. The market-im- plied path of the policy rate rose, with the median federal funds rate values in the September Summary of Eco- nomic Projections and other Federal Reserve communi- cations being viewed by market participants as indicating a commitment to sustaining a restrictive monetary policy stance. With data received over the period also indicat- ing higher-than-expected core inflation, market partici- pants placed high odds on a 75 basis point increase in the target range at the current meeting. Nonetheless, contacts were increasingly focused on the question of when the Committee might slow the pace of future in- creases in light of the substantial tightening of financial conditions that had occurred over the year. Most re- spondents to the Open Market Desk s surveys viewed a 50 basis point increase in the target range for the federal funds rate at the December meeting as the most likely outcome. On net, nominal Treasury yields ended the period higher, reflecting both an upward revision in the expected path of the policy rate and higher estimated term premiums. Investment-grade bond yields and mortgage interest rates moved up as well, to the highest levels in many years. The manager pro tem turned next to a discussion of vol- atility in global financial markets. In September, an ex- pansionary budget announced by the U.K. government resulted in an extraordinary rise in yields on gilts (long- dated U.K. government securities) and reduced gilt mar- ket liquidity. Reflecting its financial stability objective, the Bank of England initiated a temporary gilt purchase program designed to address disorderly market condi- tions. These purchases and a subsequent cancellation of some expansionary U.K. budgetary measures resulted in a retracement of much of the earlier increase in gilt yields. announced Elevated volatility in international financial markets con- tributed to volatility in U.S. core fixed-income markets. In markets for U.S. Treasury securities, some measures of market-implied volatility approached pandemic-era levels. Spreads of yields on agency mortgage-backed se- curities (MBS) over yields on Treasury securities wid- ened sharply, reflecting the sensitivity of these spreads to increased volatility. The increased volatility appeared to contribute to a decline in measures of market liquidity in core fixed-income markets, in particular around the period associated with U.K. volatility, but market func- tioning remained orderly. The foreign exchange value of the dollar appreciated fur- ther over the period. Market participants perceived sev- eral Asian economies as engaging in foreign exchange market interventions in response to rapid depreciations of local currencies. In the case of advanced economies, whose monetary policy tightening was well under way, market