Federal Reserve Press conference comparison — 3 November 2021 vs 15 December 2021
This Federal Reserve press conference comparison covers 3 November 2021 and 15 December 2021. Overall, the newer document was more hawkish. The December 2021 FOMC document shows a significant hawkish pivot relative to November: the taper is accelerated, labour market progress is deemed rapid, inflation is seen as persistent and above target, and the rate path is brought forward. This signals that the Fed is preparing for earlier rate hikes, likely starting in early-to-mid 2022.
What changed
More hawkish. The December 2021 FOMC document shows a significant hawkish pivot relative to November: the taper is accelerated, labour market progress is deemed rapid, inflation is seen as persistent and above target, and the rate path is brought forward. This signals that the Fed is preparing for earlier rate hikes, likely starting in early-to-mid 2022.
- Inflation — More hawkish. Prior document reiterated transitory narrative with a hawkish concession; current document characterizes inflation as well above target and persistent, with upward SEP revisions and wage-price spiral risks, marking a clear hawkish shift.
- Labour Market — More hawkish. Prior document had no labour market signals; current document emphasizes rapid progress toward maximum employment, strong demand, quits rate, and frames high inflation as threat to full employment, indicating a hawkish shift.
- Rate Path — More hawkish. Prior document separated tapering from rate hikes and kept rate path neutral to slightly dovish; current document accelerates taper, signals shorter lag between taper end and rate lift-off, and emphasizes inflation as trigger for action, a hawkish shift.
- Balance Sheet — More hawkish. Prior document had no balance sheet guidance; current document doubles taper pace and hints at earlier balance sheet runoff, a clear hawkish shift.
Key wording
Today, the FOMC kept interest rates near zero and, in light of the progress the economy has made toward our goals, decided to begin reducing the pace of asset purchases.
If the economy evolves broadly as expected, we judge that similar reductions in the pace of net asset purchases will likely be appropriate each month, implying that increases in our securities holdings would cease by the middle of next year.
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.
Nonetheless, it remains the case that the drivers of higher inflation have been predominantly connected to the dislocations caused by the pandemic—specifically, the effects on supply and demand from the shutdown, the uneven reopening, and the ongoing effects of the virus itself.
Supply constraints have been larger and longer lasting than anticipated.
If we were to see signs that the path of inflation, or [of] longer-term inflation expectations, was moving materially and persistently beyond levels consistent with our goal, we would use our tools to preserve price stability.
The rise in COVID cases in recent weeks, along with the emergence of the Omicron variant, pose[s] risks to the outlook.
the Committee expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment.
Since we’re two meetings away from completing the taper, assuming things go as, as expected, I think if we wanted to lift off before then, then, then what we—you would stop the taper potentially sooner. But it’s not something I expect to happen.
overall inflation is running well above our 2 percent longer-run goal and will likely continue to do so well into next year.
And inflation is well above target. So this is something we need to take into—take into account.
I don’t—I don’t foresee that there would be that kind of very extended wait at this time. The economy is so much stronger. I was here at the Fed when we lifted off the last time. And the economy is so much stronger now, so much closer to full employment. Inflation is running well above target, and growth is well above potential. There wouldn’t be the need for that kind of long delay.
Official documents
Background reading
Related
3 November 2021 press conference · 15 December 2021 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology
The Cadence Brief
The one number that moved central bank pricing — delivered each weekday morning.