Federal Reserve Press conference comparison — 28 April 2021 vs 28 July 2021

This Federal Reserve press conference comparison covers 28 April 2021 and 28 July 2021. Overall, the newer document was mixed. The July 2021 statement shows a slight hawkish tilt on inflation due to conditional tightening language, but remains firmly dovish on rate path and labor market, with new neutral balance sheet details. This signals that the Fed is acknowledging inflation risks but is not yet ready to taper, suggesting the next decision will likely maintain the current accommodative stance while advancing taper discussions.

What changed

Mixed. The July 2021 statement shows a slight hawkish tilt on inflation due to conditional tightening language, but remains firmly dovish on rate path and labor market, with new neutral balance sheet details. This signals that the Fed is acknowledging inflation risks but is not yet ready to taper, suggesting the next decision will likely maintain the current accommodative stance while advancing taper discussions.

Inflation — More hawkish. The current document introduces conditional tightening language regarding inflation, signaling vigilance absent in the prior document, while still maintaining the transitory baseline.
Labour Market — More dovish. The current document emphasizes persistent labor market slack and Delta variant risks, shifting from prior's acknowledgment of improvement to a more cautious tone.
Rate Path — Little changed. The current document maintains the prior's dovish forward guidance on rates, reiterating that rate hikes are far off, with no material change in stance.
Balance Sheet — Little changed. The current document introduces balance sheet discussion on taper sequencing confirming simultaneous reduction, but provides no directional shift from prior silence on the topic.

Key wording

28 April 2021

Today my colleagues on the FOMC and I kept interest rates near zero and maintained our sizable asset purchases.
rate path: Confirms ongoing accommodative policy; no change in stance.

we continue to expect it will be appropriate to maintain the current 0 to ¼ percent target range for the federal funds rate until labor market conditions have reached levels consistent with the Committee’s assessment of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. I would note that a transitory rise in inflation above 2 percent this year would not meet this standard.
rate path: Reinforces outcome-based guidance; transitory inflation doesn't trigger rate hikes.

However, these one-time increases in prices are likely to have only transitory effects on inflation.
inflation: Downplays inflation risk; supports patient policy stance.

Employment rose 916,000 in March, as the leisure and hospitality sector posted a notable gain for the second consecutive month. Nonetheless, employment in this sector is still more than 3 million below its level at the onset of the pandemic.
labour market: Highlights improvement but stresses large remaining shortfall.

The economy is a long way from our goals, and it is likely to take some time for substantial further progress to be achieved.
rate path: Signals no imminent tapering; downside risks dominate.

no, it is not time yet.
rate path: Explicitly pushes back on taper speculation; maintains patience.

28 July 2021

Today the Federal Open Market Committee kept interest rates near zero and maintained our asset purchases.
rate path: Confirms no change in rates or QE, as expected.

we continue to expect that it will be appropriate to maintain the current 0 to ¼ percent target range for the federal funds rate until labor market conditions have reached level—levels consistent with the Committee’s assessment of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.
rate path: Rates on hold until both employment and inflation goals are met, implying patience.

These bottleneck effects have been larger than anticipated, but as these transitory supply effects abate, inflation is expected to drop back toward our longer-run goal.
inflation: Acknowledges higher inflation but reiterates transitory view, supporting accommodative stance.

we have some ground to cover on, on the labor market side. I think we’re, we’re some way away from, from having had substantial further progress with, with max—toward the maximum-employment goal.
labour market: Indicates tapering not imminent due to employment shortfall.

We have not reached substantial further progress yet. So we’re, we’re not there, and we see our ways as having some—we see ourselves as having some ground to cover to get there.
rate path: Explicitly says taper not yet triggered, delays QE reduction timeline.

we’re clearly a ways away from considering raising interest rates. It’s not something that, that is on our radar screen right now.
rate path: Pushes back rate hike expectations, focuses on taper first.

Official documents

Background reading

28 April 2021 press conference · 28 July 2021 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology