What to Expect From the Final FOMC Meeting of 2022

The final Federal Reserve monetary policy meeting of the year will take place this week, finishing on Wednesday, April 14, with the issuing of a statement at 20:00 GMT.

The US economy is still largely robust

The U.S. economy continues to exhibit amazing strengths, particularly in the labor market, as evidenced by the continuous creation of jobs and stability in the unemployment rate in the most recent employment data, despite the obvious and growing threat of recession.

Such economic resiliency is currently proving to be more of a burden than a blessing. It has becoming harder to control persistent, widespread inflation without the Fed raising interest rates to the point where a recession is inevitable, as with each sign of strength.

The US economy grew at an annualized pace of 2.9% in the third quarter, which was much faster than economists had anticipated, according to the most current GDP figures.

The housing market is currently a drag on the economy. After declining for nine straight months to a 4.4 million annualized pace in October from over 6.5 million at the beginning of the year, existing house sales are expected to remain stable until Q3 of next year.

Housing prices increased by much to 40% during the epidemic as people needed more space inside their homes, according to analysts surveyed by Reuters, but property values in the United States will continue to decline until 2023. They anticipated a 12% loss from peak to trough, which is only approximately 30% less drastic than the previous market correction that occurred 15 years ago during the world financial crisis.

Recession Risks Still Exist

If and when the economy experiences a recession depends on a number of factors, but it usually involves rising unemployment and falling consumption.

Jamie Dimon, CEO of JPMorgan Chase & Co., recently stated on CNBC that while consumers and businesses are currently doing well, this may not last for very long due to a slowing economy and rising costs. He also thinks the Fed will increase the benchmark rate to 5%, albeit that might not be enough to quickly drive inflation back to the 2% target level.

In his speech in November, Powell mentioned that the economy's ongoing recovery from the pandemic would be largely responsible for the real GDP growth of 5.7% in 2021. For the first three quarters of this year, GDP also remained largely flat, but according to Powell, the Fed has observed evidence that point to only a minor increase in the fourth quarter and possibly only a small gain for the year as a whole.

This slowdown in growth could be caused by a number of factors, including the waning effects of the reopening and pandemic fiscal support, the global effects of Russia's war against Ukraine, and the Fed's monetary policy actions, which are affecting economic activity, particularly in interest-sensitive sectors like housing. The Fed predicts that the growth rate will need to be held at a lower level for an extended length of time.

Watch for more information about the Fed's decisions later this week!