The Federal Open Market Committee raised the target range for the federal funds rate by 0.25 percentage point in its March 2022 meeting. In its post-meeting statement, the Committee said that, with appropriate firming in the stance of monetary policy, it expects inflation to return to its 2% objective and the labor market to remain strong.
Economic activity and employment have continued to strengthen, with strong job gains and falling unemployment. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures.
The Committee noted that Russia’s invasion of Ukraine is causing tremendous human and economic hardship. The implications for the U.S. economy are highly uncertain, but in the near term the invasion and related events are likely to create additional upward pressure on inflation and weigh on economic activity.
The Committee said it will continue to monitor incoming information, including public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
What does this mean for you? Let’s rewind.
March 2022 FOMC Rewind
Quick explainer for the March FOMC decision (video, 1:18 minutes).
Transcript
Derrick: Hey Ethan! Scrolled by something about the Fed – what’s up?
Ethan: Yeah, they raised interest rates 1/4 point – that’s the first increase since COVID.
Derrick: So what does that mean?
Ethan: Raising the rate is one of the tools they can use to help keep inflation in check.
Derrick: Remind me how that works.
Ethan: The Fed is seeing that the economy is strong – especially jobs and wages – so there’s less need now to encourage people and businesses to spend.
Ethan: And they also see that inflation’s hurting people’s wallets.
Derrick: No doubt – like gas prices
Ethan: Right – and other prices are rising too. People have money to spend, but some things are still hard to find. Raising the interest rate can help cool things a bit so that businesses can keep up with demand.
Derrick: Got it! Did the Fed talk about what’s happening in Ukraine?
Ethan: Definitely – the human toll is awful.
Ethan: They expect it to affect the world’s economy, too.
Derrick: Do they think it’ll make inflation worse?
Ethan: They said it’s likely – so the Fed is keeping an especially close eye on that. And they’re ready to do more to fight inflation.
Derrick: I’ll keep an eye on the Fed, then.
Ethan: Me too!
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The views expressed here do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco or of the Board of Governors of the Federal Reserve System.