FOMC Meeting Summary – November 2022

Stacks of coins overlayed with a chart indicating rising interest rates.

This year has seen the highest inflation numbers since the early 1980s with each month posting an annual inflation rate of 7.5% or higher. These rapid price increases are far above the Fed’s target of 2% annual inflation. In response, the Fed has raised rates six times since March.

Even with the significant rate hikes this year, the Consumer Price Index [CPI] rose at an annual rate of 8.2% and the Producer Price Index [PPI] grew at an annual pace of 8.5% in September. These figures contributed to the FOMC’s decision to raise the Fed funds rate by an additional 0.75% at the most recent meeting, bringing the new target for the Fed funds rate to 3.75 ­– 4.00%. This latest move brings the Fed funds rate to its highest level since early 2008.

The combination of higher prices and increasing interest rates have put significant pressure on both consumers and businesses this year. However, there have been signs that both price increases and rate hikes could slow in the coming months.

Have rate hikes been successful in cooling inflation?

This year’s rate hikes have increased the cost of credit for both consumers and businesses. For example, the average 30-year fixed rate mortgage was issued at 3.22% in the first week of 2022. By the end of October, that same rate was over 7%.

Higher borrowing costs for consumers and businesses tend to lead to slower sales for items that typically require financing, and this dynamic can counter inflationary pressures. This can be seen in the recent housing market trends. Home sales have declined 23.8% from last year and prices have fallen about 7% from their peak.

Other aspects of the economy have not reacted as quickly to rising rates. This is typical of a rising rate environment as there can be a lag between increases in the Fed funds rate and price decreases across the economy. To this point, Fed Chair Jerome Powell said after the November FOMC meeting, “Financial conditions have tightened significantly in response to our policy actions, and we are seeing the effects on demand in the most interest-rate-sensitive sectors of the economy, such as housing.  It will take time, however, for the full effects of monetary restraint to be realized, especially on inflation.”

When will the rate hikes slow?

The FOMC has stated that the pace of interest rate hikes will continue to depend on the results of their dual mandate – maintaining full employment and moderate inflation. The labor market remains strong, with job gains continuing to improve and unemployment dipping to 3.5% in September. If that trend holds, the FOMC is likely to continue to focus on current and expected inflation when determining the appropriate monetary policy actions.

Since there is typically a delay between interest rate increases and slower inflation, the Fed may choose to slow the pace of rate hikes before inflation has dramatically decreased. In fact, a majority of Fed funds futures traders anticipate a smaller rate hike at December’s meeting, with 55% predicting a 0.50% increase.

While rate hikes may be smaller in the coming months, Powell stated that there is still “some ways to go” and “incoming data since our last meeting suggest that the ultimate level of interest rates will be higher than previously expected.” As such, businesses and consumers can expect rates to continue to rise in the coming months as the Fed grapples with stubbornly high inflation.

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At the American Deposit Management Co. [ADM], we provide valuable insights through our weekly articles and analysis of FOMC meetings that can help businesses adapt quickly to changing market conditions. To stay abreast of developments in monetary policy, the business landscape, and the economy, sign up for our mailing list to receive our weekly article and follow us on Twitter, Facebook, and LinkedIn.


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