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Federal Reserve <br />Source: Federal Reserve Source: Bloomberg <br />As expected at the February 1st meeting,the Federal Open Market Committee (FOMC)raised the fed funds target rate by 25 basis points to a <br />range of 4.50 –4.75%,in a continuing downshift from previous hikes.The decision was unanimous,and the statement reflects inflation easing <br />“somewhat”.The sentiment was hawkish, indicating that the extent of “ongoing increases”in the fed funds rate will be data dependent on <br />labor market conditions,inflation expectations,and financial and international developments.The December Summary of Economic <br />Projections indicated a peak median forecast of 5.1%in 2023 and no rate cuts until 2024;however,the market consensus diverged,implying <br />rate cuts in the second half of 2023.FOMC members forecasted a higher fed funds rate,slower GDP growth,higher inflation,and higher <br />unemployment in 2023 than in the September projections.We believe the FOMC will implement tighter monetary policy at a slower pace and <br />hold rates at restrictive levels until inflationary pressures subside and remain in the Fed’s target range for some time. <br />0.00% <br />0.50% <br />1.00% <br />1.50% <br />2.00% <br />2.50% <br />3.00% <br />3.50% <br />4.00% <br />4.50% <br />5.00% <br />Effective Federal Funds Rate <br />Yield (%)2,000,000 <br />3,000,000 <br />4,000,000 <br />5,000,000 <br />6,000,000 <br />7,000,000 <br />8,000,000 <br />9,000,000 <br />10,000,000 <br />Federal Reserve Balance Sheet Assets <br />In$ millions11