Federal Reserve Press conference comparison — 22 September 2021 vs 26 January 2022
This Federal Reserve press conference comparison covers 22 September 2021 and 26 January 2022. Overall, the newer document was more hawkish. The January 2022 statement marks a decisive hawkish pivot across all dimensions: inflation is now seen as persistent, labour market as very strong, rate hikes imminent, and balance sheet reduction accelerated. The Fed is signalling that policy normalization will proceed faster than previously anticipated to combat overheating.
What changed
More hawkish. The January 2022 statement marks a decisive hawkish pivot across all dimensions: inflation is now seen as persistent, labour market as very strong, rate hikes imminent, and balance sheet reduction accelerated. The Fed is signalling that policy normalization will proceed faster than previously anticipated to combat overheating.
- Inflation — More hawkish. Inflation assessment shifted from transitory and elevated to persistent, broad, and with upside risks, with a firm commitment to reduce inflation.
- Labour Market — More hawkish. Labour market characterisation shifted from understated slack to remarkably strong and very tight, with room to raise rates without threatening employment.
- Rate Path — More hawkish. Forward guidance shifted from imminent tapering and a possible 2022 hike to explicit signalling of a March rate hike and openness to faster tightening.
- Balance Sheet — More hawkish. Balance sheet policy shifted from no explicit guidance to a clear plan to end purchases in March and reduce holdings faster than the previous cycle.
Key wording
Today, the Federal Open Market Committee kept interest rates near zero and maintained our current pace of asset purchases.
If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted.
participants generally view that, so long as the recovery remains on track, a gradual tapering process that concludes around the middle of next year is likely to be appropriate.
Inflation is elevated and will likely remain so in coming months before moderating.
bottlenecks, hiring difficulties, and other constraints could again prove to be greater and longer lasting than anticipated, posing upside risks to inflation.
The unemployment rate was 5.2 percent in August, and this figure understates the shortfall in employment, particularly as participation in the labor market has not moved up from the low rates that have prevailed for most of the past year.
kept its policy interest rate near zero and stated its expectation that an increase in this rate would soon be appropriate.
it will soon be appropriate to raise the target range for the federal funds rate.
I would say that the Committee is, is of a mind to, to raise the federal funds rate at the March meeting, assuming that conditions are appropriate for doing so.
Inflation remains well above our longer-run goal of 2 percent. Supply and demand imbalances related to the pandemic and [to] the reopening of the economy have continued to contribute to elevated levels of inflation. These problems have been larger and longer lasting than anticipated, exacerbated by waves of the virus.
the idea that, for example, the federal funds rate is the primary means of adjusting the stance of policy, that we’ll use—determine the timing and pace of reducing the size of the balance sheet to foster the dual mandate, that we’ll begin to reduce the size after we begin the process of raising rates
The labor market has made remarkable progress and, by many measures, is very strong.
Official documents
Background reading
Related
22 September 2021 press conference · 26 January 2022 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology
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