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Minutes of the Federal Open Market Committee

A joint meeting of the Federal Open Market Committee Roberto Perli, Manager, System Open Market Account
and the Board of Governors of the Federal Reserve Sys-
Julie Ann Remache, Deputy Manager, System Open
tem was held in the offices of the Board of Governors
Market Account
on Tuesday, March 21, 2023, at 10:00 a.m. and contin-
ued on Wednesday, March 22, 2023, at 9:00 a.m. 1 Jose Acosta, Senior Communications Analyst, Division
of Information Technology, Board
Attendance
Jerome H. Powell, Chair David Altig, Executive Vice President, Federal Reserve
John C. Williams, Vice Chair Bank of Atlanta
Michael S. Barr
Michelle W. Bowman Kartik B. Athreya, Executive Vice President, Federal
Lisa D. Cook Reserve Bank of Richmond
Austan D. Goolsbee Becky C. Bareford, First Vice President, Federal
Patrick Harker Reserve Bank of Richmond
Philip N. Jefferson
Neel Kashkari Penelope A. Beattie, 5 Section Chief, Office of the
Lorie K. Logan Secretary, Board
Christopher J. Waller
Daniel O. Beltran, Deputy Associate Director, Division
Thomas I. Barkin, Raphael W. Bostic, Mary C. Daly, of International Finance, Board
Loretta J. Mester, and Sushmita Shukla, 2 Alternate
Members of the Committee Jennifer J. Burns,5 Deputy Director, Division of
Supervision and Regulation, Board
James Bullard and Susan M. Collins, Presidents of the
Federal Reserve Banks of St. Louis and Boston, Mark A. Carlson, Adviser, Division of Monetary
respectively Affairs, Board
Kelly J. Dubbert, Interim President of the Federal Todd E. Clark, Senior Vice President, Federal Reserve
Reserve Bank of Kansas City Bank of Cleveland
Joshua Gallin, Secretary Daniel Cooper, Vice President, Federal Reserve Bank
Matthew M. Luecke, Deputy Secretary of Boston
Brian J. Bonis, Assistant Secretary
Michelle A. Smith, Assistant Secretary Stephanie E. Curcuru, Deputy Director, Division of
Mark E. Van Der Weide, General Counsel International Finance, Board
Richard Ostrander, Deputy General Counsel
Wendy E. Dunn, Adviser, Division of Research and
Trevor A. Reeve, Economist
Statistics, Board
Stacey Tevlin, Economist
Beth Anne Wilson, 3 Economist Burcu Duygan-Bump, Special Adviser to the Board,
Shaghil Ahmed, 4 Roc Armenter, James A. Clouse, Division of Board Members, Board
Brian M. Doyle, Andrea Raffo, Chiara Scotti, and Rochelle M. Edge, Deputy Director, Division of
William Wascher, Associate Economists Monetary Affairs, Board

1 The Federal Open Market Committee is referenced as the 3 Attended through the discussion of the economic and finan-
“FOMC” and the “Committee” in these minutes; the Board cial situation.
of Governors of the Federal Reserve System is referenced as 4 Attended from the discussion of the economic and financial

the “Board” in these minutes. situation through the end of Wednesday’s session.
2 Elected as an Alternate by the Federal Reserve Bank of New 5 Attended through the discussion of developments in finan-

York, effective March 2, 2023. cial markets and open market operations.
Page 2 Federal Open Market Committee
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Matthew J. Eichner,5 Director, Division of Reserve Fernando M. Martin, Assistant Vice President, Federal
Bank Operations and Payment Systems, Board Reserve Bank of St. Louis
Ozge Akinci Emekli, Economic Research Advisor, Thomas Mertens, Vice President, Federal Reserve Bank
Federal Reserve Bank of New York of San Francisco
Jon Faust, Senior Special Adviser to the Chair, Division Ann E. Misback, Secretary, Office of the Secretary,
of Board Members, Board Board
Andrew Figura, Associate Director, Division of Giovanni Nicolò, Senior Economist, Division of
Research and Statistics, Board Monetary Affairs, Board
Glenn Follette, Associate Director, Division of Michael G. Palumbo, Senior Associate Director,
Research and Statistics, Board Division of Research and Statistics, Board
Michael S. Gibson, Director, Division of Supervision Marcel A. Priebsch, Principal Economist, Division of
and Regulation, Board Monetary Affairs, Board
Christine Graham,5 Special Adviser to the Board, Linda Robertson, Assistant to the Board, Division of
Division of Board Members, Board Board Members, Board
Joseph W. Gruber, Executive Vice President, Federal Achilles Sangster II, Senior Information Manager,
Reserve Bank of Kansas City Division of Monetary Affairs, Board
Valerie S. Hinojosa, Section Chief, Division of Krista Schwarz, Principal Economist, Division of
Monetary Affairs, Board Monetary Affairs, Board
Jane E. Ihrig, Special Adviser to the Board, Division of Nitish Ranjan Sinha, Special Adviser to the Board,
Board Members, Board Division of Board Members, Board
Michael T. Kiley, Deputy Director, Division of Yannick Timmer, Senior Economist, Division of
Financial Stability, Board Monetary Affairs, Board
Don H. Kim, Senior Adviser, Division of Monetary Clara Vega, Special Adviser to the Board, Division of
Affairs, Board Board Members, Board
Spencer Krane, Senior Vice President, Federal Reserve Annette Vissing-Jørgensen, Senior Adviser, Division of
Bank of Chicago Monetary Affairs, Board
Andreas Lehnert, Director, Division of Financial Jeffrey D. Walker,5 Associate Director, Division of
Stability, Board Reserve Bank Operations and Payment Systems,
Board
Paul Lengermann, Assistant Director, Division of
Research and Statistics, Board Min Wei, Senior Associate Director, Division of
Monetary Affairs, Board
Kurt F. Lewis, Special Adviser to the Board, Division
of Board Members, Board Paul R. Wood, Special Adviser to the Board, Division
of Board Members, Board
Laura Lipscomb, Special Adviser to the Board,
Division of Board Members, Board Rebecca Zarutskie, Special Adviser to the Board,
Division of Board Members, Board
David López-Salido, Senior Associate Director,
Division of Monetary Affairs, Board Recent Developments in the Banking Sector
Before turning to other agenda items, the Chair asked
Francesca Loria, Senior Economist, Division of the Vice Chair for Supervision to provide an update on
Monetary Affairs, Board recent developments in the banking sector. The Vice
Byron Lutz, Deputy Associate Director, Division of Chair for Supervision described the developments, in-
Research and Statistics, Board cluding those at Silicon Valley Bank, Signature Bank, and
 Minutes of the Meeting of March 21–22, 2023 Page 3
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Credit Suisse. He also described actions taken by the may have driven a good part of the difference between
Federal Reserve and other regulatory agencies in re- survey and market measures. The median respondent
sponse. He noted that the U.S. banking system is sound expected the Summary of Economic Projections (SEP)
and resilient. He also noted that he will be leading a re- projections for the federal funds rate at the end of 2023
view of the supervision and regulation of Silicon Valley and 2024 to shift 25 basis points higher. However, in-
Bank, and that the Federal Reserve System will apply formation gathered after the Desk surveys closed sug-
what is learned from the review to strengthen its super- gests that those expectations had declined some, to a
visory and regulatory practices as appropriate. level comparable with the December SEP. Survey re-
sponses suggested only modest changes in expectations
Developments in Financial Markets and Open
for balance sheet policy.
Market Operations
The manager turned first to a review of U.S. financial The manager turned next to a discussion of operations
market developments over the intermeeting period. and money markets. Federal funds volumes fell sharply
Early in the period, firmer-than-expected data and policy for a few days late in the period as Federal Home Loan
communications pushed interest rates higher and equity Banks (FHLBs) sought to maintain liquidity in order to
prices lower. Developments in the banking sector later meet increased demand for advances by member banks.
in the period were met with sharp reductions in Treasury Money market rates remained broadly stable, and se-
yields, particularly at shorter tenors. Treasury market li- cured and unsecured money market rates, including the
quidity was poor and implied volatility was high, but the effective fed funds rate, traded well within the target
market remained functional amid substantial trading ac- range. Use of U.S. dollar liquidity swap lines with for-
tivity. Higher Treasury market volatility contributed to eign central banks had been minimal, indicating that
wider spreads for household and business borrowing. market participants did not face significant difficulties in
obtaining dollar funding from private sources.
Financial conditions tightened considerably over the in-
termeeting period as a whole. Market contacts observed Borrowing from the new Bank Term Funding Program
that the recent developments in the banking system will had been small relative to discount window borrowing,
likely result in a pullback in bank lending, which would which had increased to record levels. Use of the over-
not be reflected in most common financial conditions night reverse repurchase agreement (ON RRP) facility
indexes. Following the banking-sector developments, fell, especially for money market mutual funds (MMFs),
equity prices for large U.S. banks underperformed the as the supply of short-term securities at attractive rates
broad market; equity prices for U.S. regional banks gen- increased.
erally underperformed by relatively more.
By unanimous vote, the Committee ratified the Desk’s
Regarding the outlook for inflation in the United States, domestic transactions over the intermeeting period.
market-based measures of inflation compensation over There were no intervention operations in foreign curren-
shorter horizons rose over the period, although com- cies for the System’s account during the intermeeting pe-
pensation retraced a good portion of its increase later in riod.
the period as markets reacted to the developments in the
Staff Review of the Economic Situation
banking sector. Forward inflation compensation
The information available at the time of the March 21–
measures continued to indicate that longer-term infla-
22 meeting indicated that labor market conditions re-
tion expectations remained well anchored. Measures of
mained tight in January and February, with robust job
inflation expectations from the Open Market Desk’s
gains and the unemployment rate near a historical low.
Survey of Primary Dealers and Survey of Market Partic-
Consumer price inflation—as measured by the
ipants moved higher at shorter horizons and were little
12-month percent change in the price index for personal
changed at longer horizons.
consumption expenditures (PCE)—was still elevated in
Regarding the outlook for monetary policy, market- January. Real gross domestic product (GDP) appeared
based measures of policy expectations suggested that the to be expanding at a modest pace in the first quarter.
federal funds rate would reach a peak in May 2023 and Although financial market data had shown reactions to
that the target range would then move lower. However, developments in the banking sector late in the intermeet-
the medians of respondents’ modal expectations of the ing period, there were essentially no economic data avail-
federal funds rate from the Desk surveys did not show able that covered this period.
any declines in the target range through the end of 2023.
Risk and liquidity premiums embedded in market prices
Page 4 Federal Open Market Committee
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Total nonfarm payroll employment increased at a faster near-term indicators—such as national and regional in-
monthly pace in January and February than in the fourth dexes for new orders—pointed to softening factory out-
quarter of last year. The unemployment rate was little put in the coming months.
changed and stood at 3.6 percent in February. Over the
The nominal U.S. international trade deficit registered a
past two months, the unemployment rate for African
record high in 2022. The trade deficit had been narrow-
Americans was unchanged, on net, and the unemploy-
ing since March of last year but resumed widening in De-
ment rate for Hispanics moved up; the unemployment
cember and January. Real goods imports rose in Decem-
rates for both groups remained above the aggregate
ber and January, led by increases in imports of consumer
measure. The aggregate measures of both the labor
goods and automotive products. Real goods exports
force participation rate and the employment-to-
also increased, but by less than imports.
population ratio increased slightly. The private-sector
job openings rate in January—as measured by the Job Indicators suggested that foreign economic growth re-
Openings and Labor Turnover Survey—was little bounded in the first quarter of 2023 as China reopened
changed, on balance, since November and remained rapidly from its COVID-19-related shutdowns and Eu-
high. rope’s economy proved to be resilient to the energy price
shock stemming from Russia’s war against Ukraine and
Recent indicators of nominal wage growth had slowed
benefited from a mild winter that reduced energy de-
but continued to be elevated. In February, the 3-month
mand. Manufacturing activity in emerging Asia showed
change in average hourly earnings for all employees was
signs of a turnaround from its pronounced slowdown
at an annual rate of 3.6 percent, slower than its 12-month
since mid-2022. The recent developments in the bank-
pace of 4.6 percent. Over the four quarters of 2022, total
ing sector led to some tightening of financial conditions
labor compensation per hour in the business sector—as
abroad. Oil prices edged down despite China’s rapid re-
measured by the Productivity and Costs data—increased
opening and the implementation of the European Un-
4.5 percent, below its pace in the previous year.
ion’s embargo on Russian refined oil products. Retail
Consumer price inflation remained elevated early in the energy inflation continued to slow, contributing to an
year. Total PCE price inflation was 5.4 percent over the easing of headline consumer price inflation in many ad-
12 months ending in January, and core PCE price infla- vanced foreign economies (AFEs). In contrast, core in-
tion—which excludes changes in consumer energy flation has shown little sign of easing in most foreign
prices and many consumer food prices—was 4.7 per- economies amid tight labor markets. In response, many
cent. The trimmed mean measure of 12-month PCE foreign central banks continued their monetary policy
price inflation constructed by the Federal Reserve Bank tightening, although some have either paused or indi-
of Dallas was 4.6 percent in January. In February, the cated that a pause soon was possible, citing the im-
12-month change in the consumer price index (CPI) was portance of assessing the cumulative effects of past pol-
6.0 percent, and core CPI inflation was 5.5 percent. The icy rate increases.
CPI, along with data from the producer price index,
Staff Review of the Financial Situation
pointed to some slowing in PCE price inflation in Feb-
Over the first several weeks of the intermeeting period,
ruary. The latest survey-based measures of longer-term
incoming economic data and FOMC communications
inflation expectations from the University of Michigan
appeared to refocus market participants on upside risks
Surveys of Consumers, the Survey of Professional Fore-
to inflation and policy rates, with the market-implied
casters, and the Federal Reserve Bank of New York’s
policy rate path steepening, nominal Treasury yields ris-
Survey of Consumer Expectations remained within the
ing, near-term inflation compensation measures increas-
range of their values reported in recent months, while
ing, and broad stock market price indexes declining. Fi-
near-term measures of inflation expectations from these
nancing conditions for businesses, households, and mu-
surveys moved down.
nicipalities had tightened during this period and were
Real GDP growth seemed to be expanding at a modest moderately restrictive overall, as borrowing costs in-
pace in the first quarter. Gains in consumer spending creased notably with the expected path of policy rates
had picked up in recent months, but growth in business and Treasury yields and as some lenders appeared to
fixed investment was slowing and residential investment tighten nonprice borrowing terms. Nonetheless, lending
was continuing to decline. After contracting over the volumes were generally solid. Credit quality was strong
second half of last year, manufacturing output expanded
moderately, on average, over January and February, but
 Minutes of the Meeting of March 21–22, 2023 Page 5
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overall, although it had worsened a bit for some borrow- stresses in the global banking sector more recently. Ear-
ers. Expectations for future credit quality continued to lier in the period, yields and market-based measures of
deteriorate in some markets. inflation expectations in the AFEs increased notably,
driven by spillovers from U.S. Treasury yields as well as
Pricing in financial markets changed notably in the latter
upside surprises in economic and inflation data for
part of the intermeeting period, amid developments in
AFEs. Later in the period, developments in the banking
the banking sector. Treasury yields and policy rate ex-
sector led to large declines in advanced-economy yields,
pectations moved down significantly, while broad stock
and, on net, AFE yields declined slightly. Additionally,
price indexes rose somewhat. The market-implied pol-
for the intermeeting period overall, the staff’s dollar in-
icy rate path shifted down sizably, with the federal funds
dex rose moderately, corporate and emerging market
rate expected to peak in May before decreasing after-
economy sovereign credit spreads widened, and foreign
ward. Further out, OIS (overnight index swap) quotes
equity indexes generally moved lower, with bank equities
at the end of the intermeeting period indicated that the
falling notably.
expected federal funds rate at year-end 2024 was
3.28 percent, about 50 basis points lower than before the U.S. unsecured funding markets showed some signs of
closures of Silicon Valley Bank and Signature Bank but pressure later in the intermeeting period. Issuance of
somewhat higher than at the time of the February commercial paper (CP) and negotiable certificates of de-
FOMC meeting. Treasury yields declined, especially at posit (NCDs) dropped a touch over the entire period,
shorter maturities, reflecting downward revisions in pol- and the fraction of CP issuance with overnight maturi-
icy rate expectations and the effects of flight to safety. ties increased but remained within normal ranges.
Inflation compensation declined, especially at short ma- Spreads of term CP and NCDs widened some, and
turities, likely reflecting, in part, a relatively larger decline spreads for issuers with lower credit ratings rose more,
in risk premiums on nominal Treasury securities relative but other unsecured spreads remained within normal
to Treasury Inflation-Protected Securities due to strong ranges. Prime MMFs experienced outflows, while gov-
safe-haven demands. ernment MMFs had inflows.
Late in the intermeeting period, U.S. bank stock prices The effective federal funds rate was little changed after
declined notably. Regional banks with unusually large the closures of Silicon Valley Bank and Signature Bank.
reliance on uninsured deposits and holdings of securities Amid these developments, federal funds volumes ini-
with significant unrealized mark-to-market losses expe- tially declined sharply as the FHLBs reduced their activ-
rienced larger declines in stock prices. Broad equity ity in the federal funds market in order to meet increased
prices rose somewhat after the closures of Silicon Valley demand for advances by member banks; market volume
Bank and Signature Bank, reportedly driven by inves- subsequently rebounded partially. Activity in the repur-
tors’ reassessment of the outlook for interest rates, and chase agreement market was robust, and trading volume
after the announcement that UBS had agreed to buy remained within recent ranges. ON RRP take-up re-
Credit Suisse. The VIX—the one-month option- mained within recent ranges as well.
implied volatility on the S&P 500—increased to about
Borrowing costs for businesses, households, and munic-
26.5 percent following the closures of Silicon Valley
ipalities rose notably in the early part of the intermeeting
Bank and Signature Bank, but it subsequently declined
period, mostly in line with increases in the federal funds
to 21 percent—around the 70th percentile of its histori-
rate and Treasury yields. Since the closures of Silicon
cal distribution. Swaption-implied volatilities of short-
Valley Bank and Signature Bank, spreads on corporate
term interest rates increased notably during this period,
bonds, municipal bonds, and leveraged loans rose, with
reflecting increased uncertainty about the interest rate
speculative-grade corporate bond spreads registering the
outlook. Some of the pricing moves in asset markets
largest moves; spreads remained at moderate levels rela-
may have been amplified by impaired liquidity condi-
tive to their historical distributions. Investment-grade
tions. Despite deteriorating liquidity conditions in
corporate yields and municipal yields were down mod-
Treasury, bond, and equity markets, market functioning
erately, whereas speculative-grade corporate yields and
remained orderly.
leveraged loan yields were up modestly. Mortgage rates
Over the intermeeting period, foreign financial markets were unchanged amid an increase in mortgage-backed
were volatile as investors’ focus shifted from resilience securities (MBS) spreads.
in economic activity and stubbornly high core inflation
Based on data that do not cover the period following the
across advanced economies earlier in the period to
closures of Silicon Valley Bank and Signature Bank,
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nonprice terms and standards appeared to tighten some- markedly this year and then to track core inflation over
what in a number of markets. Nevertheless, generally the following two years. In 2024 and 2025, both total
solid funding flows suggest that most firms and house- and core PCE price inflation were expected to be near
holds had remained broadly able to access funding. Data 2 percent.
on credit conditions following the developments in the
The staff judged that the uncertainty around the baseline
banking sector were limited. After the two bank clo-
projection was much greater than at the time of the pre-
sures, issuance of municipal bond and leveraged loans
vious forecast. In particular, the staff viewed the risks
was sluggish, and gross issuance of corporate bonds fell
around the baseline projection as determined im-
to near zero. Mortgage loans to households remained
portantly by banking conditions and the implications for
available.
financial conditions. If the effects of the recent devel-
The credit quality of businesses and households was opments in the banking sector on macroeconomic con-
largely stable over the intermeeting period. However, ditions were to abate quickly, then the risks around the
measures of credit performance showed some signs of baseline would be tilted to the upside for both economic
weakening. Leveraged loan credit quality deteriorated activity and inflation. If banking and financial condi-
somewhat after the closures of Silicon Valley Bank and tions and their effects on macroeconomic conditions
Signature Bank. Credit quality for residential mortgages were to deteriorate more than assumed in the baseline,
remained unchanged. then the risks around the baseline would be skewed to
the downside for both economic activity and inflation,
Staff Economic Outlook
particularly because historical recessions related to finan-
For some time, the forecast for the U.S. economy pre-
cial market problems tend to be more severe and persis-
pared by the staff had featured subdued real GDP
tent than average recessions.
growth for this year and some softening in the labor
market. Given their assessment of the potential eco- Participants’ Views on Current Conditions and the
nomic effects of the recent banking-sector develop- Economic Outlook
ments, the staff’s projection at the time of the March In conjunction with this FOMC meeting, participants
meeting included a mild recession starting later this year, submitted their projections of the most likely outcomes
with a recovery over the subsequent two years. Real for real GDP growth, the unemployment rate, and infla-
GDP growth in 2024 was projected to remain below the tion for each year from 2023 through 2025 and over the
staff’s estimate of potential output growth, and then longer run. The projections were based on their individ-
GDP growth in 2025 was expected to be above that of ual assessments of appropriate monetary policy, includ-
potential. Resource utilization in both product and labor ing the path of the federal funds rate. The longer-run
markets was forecast to be much less tight than in the projections represented each participant’s assessment of
January projection. The level of real output was pro- the rate to which each variable would be expected to
jected to move below the staff’s estimate of potential converge, over time, under appropriate monetary policy
output in early 2024, more than a year sooner than in the and in the absence of further shocks to the economy.
previous projection. Likewise, the unemployment rate An SEP was released to the public following the conclu-
was projected to rise above the staff’s estimate of its nat- sion of the meeting.
ural rate early next year.
In their discussion of current economic conditions, par-
On a four-quarter change basis, total PCE price inflation ticipants noted that recent indicators pointed to modest
was forecast to be 2.8 percent this year, with core infla- growth in spending and production. At the same time,
tion at 3.5 percent. Core goods inflation was projected though, participants noted that job gains had picked up
to move down further this year and then remain sub- in recent months and were running at a robust pace; the
dued; housing services inflation was expected to peak unemployment rate had remained low. Inflation re-
later this year and then move down, while core nonhous- mained elevated. Participants agreed that the U.S. bank-
ing services inflation was forecast to slow gradually as ing system remained sound and resilient. They com-
nominal wage growth eased further. Reflecting the ef- mented that recent developments in the banking sector
fects of less projected tightness in product and labor were likely to result in tighter credit conditions for
markets, core inflation was forecast to slow sharply next households and businesses and to weigh on economic
year. With steep declines in consumer energy prices and activity, hiring, and inflation. Participants agreed that
a substantial moderation in food price inflation expected the extent of these effects was uncertain. Against this
for this year, total inflation was projected to step down
 Minutes of the Meeting of March 21–22, 2023 Page 7
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background, participants continued to be highly atten- In their discussion of the household sector, participants
tive to inflation risks. noted that incoming data on real consumer expenditures
showed a pickup in spending in January and February.
In assessing the economic outlook, participants noted
They attributed the pickup to strong job gains, rising real
that since they met in February, data on inflation, em-
disposable income, and households continuing to run
ployment, and economic activity generally came in
down excess savings accumulated during the pandemic.
stronger than expected. They also noted, however, that
They also noted that an atypically warm start to this year,
the developments in the banking sector that had oc-
along with challenges in seasonally adjusting data, likely
curred late in the intermeeting period affected their
contributed to the pickup in the reported data. A few
views of the economic and policy outlook and the un-
participants observed that credit card delinquencies, par-
certainty surrounding that outlook. Based on incoming
ticularly for lower-income households, had risen in the
economic data, participants’ assessments of the effects
face of elevated inflation and higher nominal interest
of cumulative policy firming, and their initial views on
rates. Participants noted that recent developments in the
the likely economic effect of the recent banking-sector
banking sector and the associated rise in uncertainty
developments, participants generally expected real GDP
would likely weigh on consumer sentiment and that in-
to grow this year at a pace well below its long-run trend
creased caution on the part of consumers could restrain
rate. With inflation remaining unacceptably high, partic-
spending. A couple of participants observed that high-
ipants expected that a period of below-trend growth in
frequency measures of consumer sentiment had not yet
real GDP would be needed to bring aggregate demand
shown a significant change following the recent devel-
into better balance with aggregate supply and thereby re-
opments in the banking sector, although they also
duce inflationary pressures. Many participants remarked
acknowledged that the situation was fluid.
that the incoming data before the onset of the banking-
sector stresses had led them to see the appropriate path Regarding the business sector, participants observed that
for the federal funds rate as somewhat higher than their growth in business fixed investment was being re-
assessment at the time of the December meeting. After strained by tighter financial conditions that reflected cu-
incorporating the banking-sector developments, partici- mulative policy firming to date. Participants expected
pants indicated that their policy rate projections were the likely tightening of credit conditions due to the re-
now about unchanged from December. cent developments in the banking sector to further
weigh on investment spending. In addition, the bank-
Participants agreed that the actions taken so far by the
ing-sector developments could damp business confi-
Federal Reserve in coordination with other government
dence and increase firms’ caution, reducing their willing-
agencies, as well as actions taken by foreign authorities
ness to hire new workers. However, a few participants
to address banking and financial stresses outside the
mentioned that their nonbank business contacts re-
U.S., had helped calm conditions in the banking sector.
ported that the banking-sector developments so far had
Even with the actions, participants recognized that there
not resulted in significant changes in their hiring and
was significant uncertainty as to how those conditions
capital spending plans or sales expectations, though their
would evolve. Participants assessed that the develop-
contacts also acknowledged increased uncertainties
ments so far would likely lead to some weakening of
around their outlooks.
credit conditions, as some banks were likely to tighten
lending standards amid rising funding costs and in- Participants agreed that the labor market remained very
creased concerns about liquidity. Participants noted that tight. Job gains had picked up to a robust pace in Janu-
it was too early to assess with confidence the magnitude ary and February, and the unemployment rate remained
of the effect of a credit tightening on economic activity low. Participants noted some signs of improvement in
and inflation, and that it was important to continue to the imbalances between demand and supply in the labor
closely monitor developments and update assessments market, including further declines in the quits rate as well
of the actual and expected effects of credit tightening. as an increase in the overall labor force participation rate
Several participants noted that regional and community and the return of the prime-age participation rate to pre-
banks, a small number of which had come under signif- pandemic levels. Furthermore, participants observed
icant stress, were important in small business and mid- that wage growth appeared to be slowing gradually amid
dle-market lending and were providing critical and this apparent easing in labor demand and increase in la-
unique financial services to many communities and in- bor supply. However, participants assessed that labor
dustries. demand continued to substantially exceed labor supply,
and several participants pointed out that wage growth
Page 8 Federal Open Market Committee
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was still well above the rates that would be consistent though they also recognized some downside risks to in-
over the longer run with the 2 percent inflation objec- flation. As a source of upside risk to inflation, partici-
tive, given current estimates of trend productivity pants cited the possibility of more-persistent-than-
growth. Participants expected that, under appropriate anticipated price pressures, due to, for example, surpris-
monetary policy, supply and demand conditions in the ingly resilient labor demand. As a source of downside
labor market will come into better balance over time, risk to inflation, participants noted that if banks reduce
easing upward pressures on wages and prices. the supply of credit by more than expected, the likely
restraint on economic activity and hiring could put addi-
With inflation still well above the Committee’s longer-
tional downward pressure on inflation.
run goal of 2 percent, participants agreed that inflation
was unacceptably high. Participants commented that re- In their consideration of appropriate monetary policy ac-
cent inflation data indicated slower-than-expected pro- tions at this meeting, participants concurred that infla-
gress on disinflation. In particular, they noted that revi- tion remained well above the Committee’s longer-run
sions to the price data had indicated less disinflation at goal of 2 percent and that the recent data on inflation
the end of last year than had been previously reported provided few signs that inflation pressures were abating
and that inflation was still quite elevated. Participants at a pace sufficient to return inflation to 2 percent over
noted that, on a 12-month basis, core goods price infla- time. Participants also noted that recent developments
tion declined as supply chains continued to improve, but in the banking sector would likely result in tighter credit
the pace of the decline had slowed, highlighting the still conditions for households and businesses and weigh on
uncertain nature of the disinflationary process. Partici- economic activity, hiring, and inflation, though the ex-
pants expected that housing services inflation would tent of these effects was highly uncertain. Against this
likely begin to slow in coming months, reflecting contin- backdrop, all participants agreed that it was appropriate
ued smaller increases, or potentially declines, in rents on to raise the target range for the federal funds rate 25 ba-
new leases. Regarding prices for core services excluding sis points to 4¾ to 5 percent. All participants also agreed
housing, participants agreed that there was little evidence that it was appropriate to continue the process of reduc-
pointing to disinflation in this component. Participants ing the Federal Reserve’s securities holdings, as de-
generally judged that some more easing in labor market scribed in its previously announced Plans for Reducing
tightness and slowing in nominal wage growth would be the Size of the Federal Reserve’s Balance Sheet.
necessary for sustained disinflation. Additionally, partic-
Several participants noted that, in their policy delibera-
ipants observed that indicators of short-term inflation
tions, they considered whether it would be appropriate
expectations from surveys of households and businesses
to hold the target range steady at this meeting. They
had come down further, while longer-term inflation ex-
noted that doing so would allow more time to assess the
pectations remained well anchored. Participants also
financial and economic effects of recent banking-sector
discussed the potential effect on inflation of the devel-
developments and of the cumulative tightening of mon-
opments in the banking sector. They noted that a tight-
etary policy. However, these participants also observed
ening of credit conditions was likely to weigh on aggre-
that the actions taken by the Federal Reserve in coordi-
gate demand, which in turn could help reduce inflation-
nation with other government agencies helped calm con-
ary pressures. However, participants observed that the
ditions in the banking sector and lessen the near-term
size of such an effect was highly uncertain.
risks to economic activity and inflation. Consequently,
Participants generally observed that the recent develop- these participants judged it appropriate to increase the
ments in the banking sector had further increased the target range 25 basis points because of elevated inflation,
already-high level of uncertainty associated with their the strength of the recent economic data, and their com-
outlooks for economic activity, the labor market, and in- mitment to bring inflation down to the Committee’s
flation. Participants saw risks to economic activity as 2 percent longer-run goal.
weighted to the downside. As a source of downside risk
Some participants noted that given persistently high in-
to activity, they noted the possibility that banks would
flation and the strength of the recent economic data,
reduce the supply of credit by more than expected,
they would have considered a 50 basis point increase in
which could restrain economic activity significantly.
the target range to have been appropriate at this meeting
Participants mentioned potential intensification of Rus-
in the absence of the recent developments in the banking
sia’s war against Ukraine as an additional source of
sector. However, due to the potential for banking-sector
downside risk to the economic outlook. Participants
developments to tighten financial conditions and to
generally saw risks to inflation as weighted to the upside,
 Minutes of the Meeting of March 21–22, 2023 Page 9
_____________________________________________________________________________________________

weigh on economic activity and inflation, they judged it incoming information regarding changes in credit con-
prudent to increase the target range by a smaller incre- ditions and credit flows as well as broader changes in fi-
ment at this meeting. These participants noted that do- nancial conditions and to assess the implications for eco-
ing so would also allow the Committee time to better nomic activity, labor markets, and inflation. Several par-
assess the effects of banking-sector developments on ticipants emphasized the need to retain flexibility and
credit conditions and the economy as the Committee optionality in determining the appropriate stance of
moved toward a sufficiently restrictive stance of mone- monetary policy given the highly uncertain economic
tary policy. outlook.
Participants observed that the actions taken by the Fed- Participants emphasized a number of risk-management
eral Reserve in coordination with other government considerations related to the conduct of monetary pol-
agencies in the days preceding the meeting had served to icy. Some participants observed that downside risks to
calm conditions in the banking sector. Participants growth and upside risks to unemployment had increased
noted that the most significant issues appeared to have because of the risk that banking-sector developments
been limited to a small number of banks with poor risk- could lead to further tightening of credit conditions and
management practices and that the banking system re- weigh on economic activity. Some participants also
mained sound and resilient. Participants emphasized noted that, with inflation still well above the Commit-
that the Federal Reserve should use its liquidity and tee’s longer-run goal and the recent economic data re-
lender-of-last-resort tools, as well as its microprudential maining strong, upside risks to the inflation outlook re-
and macroprudential regulatory and supervisory tools, to mained a key factor shaping the policy outlook, and that
address stress in the banking sector and to mitigate fu- maintaining a restrictive policy stance until inflation is
ture financial stability risks. Participants agreed that re- clearly on a downward path toward 2 percent would be
cent banking developments would factor into the Com- appropriate from a risk-management perspective. Sev-
mittee’s monetary policy decisions to the extent that eral participants noted the importance of longer-term in-
these developments affect the outlook for employment flation expectations remaining anchored and remarked
and inflation and the risks surrounding the outlook. Par- that the longer inflation remained elevated, the greater
ticipants reaffirmed their strong commitment to return- the risk of inflation expectations becoming unanchored.
ing inflation to the Committee’s 2 percent objective. Participants generally agreed on the importance of
closely monitoring incoming information and its impli-
In discussing the policy outlook, participants observed
cations for the economic outlook, and that they were
that inflation remained much too high and that the labor
prepared to adjust their views on the appropriate stance
market remained tight; as a result, they anticipated that
of monetary policy in response to the incoming data and
some additional policy firming may be appropriate to at-
emerging risks to the economic outlook.
tain a sufficiently restrictive policy stance to return infla-
tion to 2 percent over time. Many participants noted Committee Policy Actions
that the likely effects of recent banking-sector develop- In their discussion of monetary policy for this meeting,
ments on economic activity and inflation had led them members agreed that recent indicators pointed to mod-
to lower their assessments of the federal funds rate target est growth in spending and production. They also con-
range that would be sufficiently restrictive compared curred that job gains had picked up in recent months and
with assessments based solely on the recent economic were running at a robust pace, that the unemployment
data. In determining the extent of future increases in the rate had remained low, and that inflation remains ele-
target range, participants judged that it would be appro- vated. Members concurred that the U.S. banking system
priate to take into account the cumulative tightening of is sound and resilient. They also agreed that recent de-
monetary policy, the lags with which monetary policy af- velopments were likely to result in tighter credit condi-
fects economic activity and inflation, and economic and tions for households and businesses and to weigh on
financial developments. economic activity, hiring, and inflation, but that the ex-
tent of these effects was uncertain. Members also con-
In light of the highly uncertain economic outlook, par-
curred that they remained highly attentive to inflation
ticipants underscored the importance of closely moni-
risks.
toring incoming information and assessing the implica-
tions for future monetary policy decisions. Participants Members agreed that the Committee seeks to achieve
noted that it would be particularly important to review maximum employment and inflation at the rate of 2 per-
cent over the longer run. In support of these goals,
Page 10 Federal Open Market Committee
_____________________________________________________________________________________________

members agreed to raise the target range for the federal • Roll over at auction the amount of principal
funds rate to 4¾ to 5 percent. Members agreed that they payments from the Federal Reserve’s hold-
would closely monitor incoming information and assess ings of Treasury securities maturing in each
the implications for monetary policy. Given recent de- calendar month that exceeds a cap of
velopments, members anticipated that some additional $60 billion per month. Redeem Treasury
policy firming may be appropriate in order to attain a coupon securities up to this monthly cap
stance of monetary policy that is sufficiently restrictive and Treasury bills to the extent that coupon
to return inflation to 2 percent over time. Members con- principal payments are less than the
curred that, in determining the extent of future increases monthly cap.
in the target range, they would take into account the cu-
mulative tightening of monetary policy, the lags with • Reinvest into agency mortgage-backed se-
which monetary policy affects economic activity and in- curities (MBS) the amount of principal pay-
flation, and economic and financial developments. In ments from the Federal Reserve’s holdings
addition, members agreed that they would continue re- of agency debt and agency MBS received in
ducing the Federal Reserve’s holdings of Treasury secu- each calendar month that exceeds a cap of
rities and agency debt and agency MBS, as described in $35 billion per month.
its previously announced plans. All members affirmed • Allow modest deviations from stated
that they remained strongly committed to returning in- amounts for reinvestments, if needed for
flation to its 2 percent objective. operational reasons.
Members agreed that, in assessing the appropriate stance • Engage in dollar roll and coupon swap
of monetary policy, they would continue to monitor the transactions as necessary to facilitate settle-
implications of incoming information for the economic ment of the Federal Reserve’s agency MBS
outlook. They would be prepared to adjust the stance of transactions.”
monetary policy as appropriate if risks emerge that could
impede the attainment of the Committee’s goals. Mem- The vote also encompassed approval of the statement
bers agreed that their assessments will take into account below for release at 2:00 p.m.:
a wide range of information, including readings on labor “Recent indicators point to modest growth in
market conditions, inflation pressures and inflation ex- spending and production. Job gains have
pectations, and financial and international develop- picked up in recent months and are running at
ments. a robust pace; the unemployment rate has re-
At the conclusion of the discussion, the Committee mained low. Inflation remains elevated.
voted to direct the Federal Reserve Bank of New York, The U.S. banking system is sound and resilient.
until instructed otherwise, to execute transactions in the Recent developments are likely to result in
System Open Market Account in accordance with the tighter credit conditions for households and
following domestic policy directive, for release at businesses and to weigh on economic activity,
2:00 p.m.: hiring, and inflation. The extent of these effects
“Effective March 23, 2023, the Federal Open is uncertain. The Committee remains highly at-
Market Committee directs the Desk to: tentive to inflation risks.

• Undertake open market operations as nec- The Committee seeks to achieve maximum em-
essary to maintain the federal funds rate in ployment and inflation at the rate of 2 percent
a target range of 4¾ to 5 percent. over the longer run. In support of these goals,
the Committee decided to raise the target range
• Conduct standing overnight repurchase for the federal funds rate to 4¾ to 5 percent.
agreement operations with a minimum bid The Committee will closely monitor incoming
rate of 5 percent and with an aggregate op- information and assess the implications for
eration limit of $500 billion. monetary policy. The Committee anticipates
that some additional policy firming may be ap-
• Conduct standing overnight reverse repur-
propriate in order to attain a stance of monetary
chase agreement operations at an offering
policy that is sufficiently restrictive to return in-
rate of 4.8 percent and with a per-counter-
flation to 2 percent over time. In determining
party limit of $160 billion per day.
 Minutes of the Meeting of March 21–22, 2023 Page 11
_____________________________________________________________________________________________

the extent of future increases in the target range, To support the Committee’s decision to raise the target
the Committee will take into account the cumu- range for the federal funds rate, the Board of Governors
lative tightening of monetary policy, the lags of the Federal Reserve System voted unanimously to
with which monetary policy affects economic raise the interest rate paid on reserve balances to 4.9 per-
activity and inflation, and economic and finan- cent, effective March 23, 2023. The Board of Gover-
cial developments. In addition, the Committee nors of the Federal Reserve System voted unanimously
will continue reducing its holdings of Treasury to approve a ¼ percentage point increase in the primary
securities and agency debt and agency mort- credit rate to 5 percent, effective March 23, 2023. 6
gage-backed securities, as described in its previ-
It was agreed that the next meeting of the Committee
ously announced plans. The Committee is
would be held on Tuesday–Wednesday, May 2–3, 2023.
strongly committed to returning inflation to its
The meeting adjourned at 10:15 a.m. on March 22, 2023.
2 percent objective.
Notation Vote
In assessing the appropriate stance of monetary
By notation vote completed on February 21, 2023, the
policy, the Committee will continue to monitor
Committee unanimously approved the minutes of the
the implications of incoming information for
Committee meeting held on January 31–Febru-
the economic outlook. The Committee would
ary 1, 2023.
be prepared to adjust the stance of monetary
policy as appropriate if risks emerge that could
impede the attainment of the Committee’s
goals. The Committee’s assessments will take
_______________________
into account a wide range of information, in-
Joshua Gallin
cluding readings on labor market conditions, in-
Secretary
flation pressures and inflation expectations, and
financial and international developments.”
Voting for this action: Jerome H. Powell, John C.
Williams, Michael S. Barr, Michelle W. Bowman, Lisa D.
Cook, Austan D. Goolsbee, Patrick Harker, Philip N.
Jefferson, Neel Kashkari, Lorie K. Logan, and
Christopher J. Waller.
Voting against this action: None.

6 In taking this action, the Board approved requests to estab- March 23, 2023, or the date such Reserve Banks inform the
lish that rate submitted by the Boards of Directors of the Fed- Secretary of the Board of such a request. (Secretary’s note:
eral Reserve Banks of Boston, New York, Philadelphia, Rich- Subsequently, the Federal Reserve Banks of Cleveland, Chi-
mond, Atlanta, Kansas City, Dallas, and San Francisco. The cago, St. Louis, and Minneapolis were informed of the Board’s
vote also encompassed approval by the Board of Governors approval of their establishment of a primary credit rate of
of the establishment of a 5 percent primary credit rate by the 5 percent, effective March 23, 2023.)
remaining Federal Reserve Banks, effective on the later of