• Officials at the December 13-14 FOMC meeting agreed to continue increasing the cost of credit in 2023 but gradually in order to limit economic growth risks.
• Policymakers were concerned about controlling the rate of price rises and cautioned against prematurely loosening monetary policy.
• The FOMC meeting revealed that most participants emphasized the need to retain flexibility and optionality when moving policy to a more restrictive stance.
At the Federal Open Market Committee (FOMC) meeting held on December 13-14, policymakers discussed the possibility of raising the cost of credit in the coming year. The officials agreed to continue increasing the cost of credit in 2023, but at a slower pace in order to limit economic growth risks.
Policymakers were concerned about controlling the rate of price rises and cautioned against prematurely loosening monetary policy. Since inflation remains persistently high, the attendees felt that it was important to take steps to contain the rate of price increases. The officials indicated that it was important to observe historical experience and not act too hastily with monetary policy.
At the meeting, the officials considered multiple sources of uncertainty associated with inflation. These included China’s relaxation of zero-COVID policies, Russia’s continued war against Ukraine, and the effect of synchronized policy firming by major central banks. Despite these uncertainties, the officials noted that financial conditions had eased and that significant progress had been made in the period following several months of tightening.
The FOMC meeting also revealed that most participants emphasized the need to retain flexibility and optionality when moving policy to a more restrictive stance. This indicates that the officials are considering lower rate hikes at the January 31/February 1 meeting.
Overall, the FOMC meeting highlighted the importance of controlling the rate of price rises while still allowing for some economic growth. The officials are aware of the uncertainties associated with inflation and are considering all options when it comes to their monetary policy. As the meeting revealed, the officials are committed to retaining flexibility and optionality when it comes to setting the federal funds rate target.