Federal Reserve Press conference comparison — 28 July 2021 vs 3 November 2021

This Federal Reserve press conference comparison covers 28 July 2021 and 3 November 2021. Overall, the newer document was more hawkish. The Fed pivots from a neutral-dovish stance with transitory inflation and ongoing QE to a hawkish inflation assessment and balance sheet tightening, while keeping rates on hold with explicit dovish guidance. The next decision likely continues taper as planned, with rates unchanged until labour market conditions improve.

What changed

More hawkish. The Fed pivots from a neutral-dovish stance with transitory inflation and ongoing QE to a hawkish inflation assessment and balance sheet tightening, while keeping rates on hold with explicit dovish guidance. The next decision likely continues taper as planned, with rates unchanged until labour market conditions improve.

Inflation — More hawkish. Inflation language shifted from 'transitory' and expected to moderate to acknowledging persistently higher inflation, dropping the transitory label and signalling vigilance.
Labour Market — Little changed. Both prior and current stress labour market slack and uncertainty, with no material shift in characterisation.
Rate Path — More dovish. Current explicitly decouples tapering from rate hikes, stating 'premature to raise rates' and conditioning hikes on labour market healing, a clearer dovish signal than prior's mixed guidance.
Balance Sheet — More hawkish. Prior had no explicit balance sheet guidance; current announces taper start with a faster pace than expected, a tightening move despite maintaining flexibility.

Key wording

28 July 2021

Today the Federal Open Market Committee kept interest rates near zero and maintained our asset purchases.
rate path: No change in policy; expected but confirms accommodative stance.

we are continuing to increase our holdings of Treasury securities by at least $80 billion per month and of agency MBS by at least $40 billion per month until substantial further progress has been made toward our maximum-employment and price-stability goals.
rate path: QE continues at current pace with no end date; condition 'substantial further progress' is key for tapering timing.

Inflation has increased notably and will likely remain elevated in coming months before moderating. ... as these transitory supply effects abate, inflation is expected to drop back toward our longer-run goal.
inflation: Reinforces transitory view; suggests no immediate policy response to high inflation.

If we saw signs that the path of inflation or longer-term inflation expectations were moving materially and persistently beyond levels consistent with our goal, we’d be prepared to adjust the stance of policy.
rate path: Opens door to tightening if inflation proves persistent; conditional hawkish signal.

the labor market has a ways to go.
labour market: Indicates employment shortfall remains, reinforcing patience on policy.

In coming meetings, the Committee will again assess the economy’s progress toward our goals, and the timing of any change in the pace of our asset purchases will depend on the incoming data.
rate path: Data-dependent approach; no commitment to timeline for tapering.

3 November 2021

Our decision today to begin tapering our asset purchases does not imply any direct signal regarding our interest rate policy. We continue to articulate a different and more stringent test for the economic conditions that would need to be met before raising the federal funds rate.
rate path: Explicitly decouples tapering from rate hikes; rates to stay low longer.

It is time to taper, we think, because the economy has achieved substantial further progress toward our goals, measured from last December. We don’t think it’s time yet to raise interest rates.
rate path: Confirms taper start but pushes back on market rate hike expectations.

But what it really boils down to is something that’s common sense. And that is risk management. We have to be aware of the risks that we’re—particularly now the risk of significantly higher inflation.
inflation: Highlights inflation risk, signaling vigilance.

The time for lifting rates and beginning to remove accommodation will depend on the path of the economy.
rate path: Keeps optionality; rate hikes are data-dependent.

Right now, people are staying out of the labor market because of caretaking [and] because of fear of COVID to a significant extent. So I think there’s room for a whole lot of humility here, as we try to think about what maximum employment would be.
labour market: High uncertainty about max employment suggests Fed will be patient before raising rates.

We don’t think it’s a good time to raise interest rates, though, because we want to see the labor market heal further.
rate path: Explicitly conditions rate hikes on labor market healing, pushing back on near-term hikes.

Official documents

Background reading

28 July 2021 press conference · 3 November 2021 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology