Federal Reserve Press conference comparison — 27 July 2022 vs 21 September 2022
This Federal Reserve press conference comparison covers 27 July 2022 and 21 September 2022. Overall, the newer document was more hawkish. The September 2022 statement marks a decisive hawkish escalation from July, with the Fed committing to a sufficiently restrictive stance and explicitly accepting labor market softening as a cost of reducing inflation. The next decision is likely another large rate hike, with the dot plot signaling a higher terminal rate and no near-term easing.
What changed
More hawkish. The September 2022 statement marks a decisive hawkish escalation from July, with the Fed committing to a sufficiently restrictive stance and explicitly accepting labor market softening as a cost of reducing inflation. The next decision is likely another large rate hike, with the dot plot signaling a higher terminal rate and no near-term easing.
- Inflation — More hawkish. Inflation assessment intensifies: prior highlighted elevated readings, current emphasizes upside risks and persistent shelter inflation, signaling heightened concern.
- Labour Market — More hawkish. Labour market shift: prior noted extreme tightness giving room to hike, current explicitly accepts need for softer conditions, showing willingness to tolerate economic pain to curb inflation.
- Rate Path — More hawkish. Rate path strongly hawkish: prior had mixed signals with a dovish nod to eventual slowdown, current overwhelmingly emphasizes further hikes, higher terminal rate, and a high bar for cuts, with only a minor nod to future pace moderation.
- Balance Sheet — Little changed. Balance sheet: no material change; prior had no signal, current indicates no imminent MBS sales, maintaining status quo.
Key wording
At today’s meeting, the Committee raised the target range for the federal funds rate by ¾ of a percentage point, bringing the target range to 2¼ to 2½ percent.
We anticipate that ongoing increases in the target range for the federal funds rate will be appropriate; the pace of those increases will continue to depend on the incoming data and the evolving outlook for the economy.
While another unusually large increase could be appropriate at our next meeting, that is a decision that will depend on the data we get between now and then.
As the stance of monetary policy tightens further, it likely will become appropriate to slow the pace of increases while we assess how our cumulative policy adjustments are affecting the economy and inflation.
This process is likely to involve a period of below-trend economic growth and some softening in labor market conditions.
Over the 12 months ending in May, total PCE prices rose 6.3 percent; ... In June, the 12-month change in the consumer price index came in above expectations at 9.1 percent
Today the FOMC raised its policy interest rate by ¾ percentage point, and we anticipate that ongoing increases will be appropriate.
We are moving our policy stance purposefully to a level that will be sufficiently restrictive to return inflation to 2 percent.
Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy.
The median projection for the appropriate level of the federal funds rate is 4.4 percent at the end of this year, 1 percentage point higher than projected in June. The median projection rises to 4.6 percent at the end of next year.
the overarching focus of the Committee is getting inflation back down to 2 percent. To accomplish that, we think we’ll need to do two things, in particular: to achieve a period of growth below trend; and also some softening in labor market conditions to foster a better balance between demand and supply in the labor market.
Participants continue to see risks to inflation as weighted to the upside.
Official documents
Background reading
Related
27 July 2022 press conference · 21 September 2022 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology
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