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- After peaking at $8.965 trillion in mid-April 2022, the Federal Reserve’s balance sheet declined to $8.340 trillion at the beginning of March. With stress in financial markets resulting from the failure of select regional banks in the U.S. and uncertainties abroad, the Federal Reserve created new lending facilities to ensure adequate liquidity in the banking system. As a result, the Fed’s balance sheet was $8.734 trillion last week, up $394.1 billion in the past three weeks.
- The Federal Open Market Committee increased short-term interest rates by 25 basis points at the conclusion of its March 21–22 meeting, with the target federal funds rate now rising to 4.75–5.00%. In his testimony before Congress on March 7–8, Federal Reserve Chair Jerome H. Powell suggested that this increase would be 50 basis points, so the current action represented a downgrade on those expectations on banking worries.
- Despite the financial uncertainties highlighted over the past few weeks, the FOMC remains concerned about inflationary pressures in the U.S. economy. In accompanying economic projections, participants predicted core PCE inflation decelerating to 3.6% in 2023, 2.6% in 2024 and 2.1% in 2025. The Federal Reserve has signaled at least one more rate hike this year, and the next FOMC meeting is May 2–3
- Manufacturing activity contracted for the fifth straight month, according to the S&P Global Flash U.S. Manufacturing PMI, but with the headline index improving from 47.3 in February to 49.3 in March. Output expanded for the first time since October, and respondents continued to signal optimism about production over the next six months.
- More notably in the S&P release, the index for supplier delivery times reflected the largest narrowing in the history of the series, which dates to April 2007, highlighting the continuing improvement in supply chain bottlenecks
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