Federal Reserve Press conference comparison — 27 July 2022 vs 2 November 2022

This Federal Reserve press conference comparison covers 27 July 2022 and 2 November 2022. Overall, the newer document was more hawkish. The November 2022 document represents a significant hawkish repricing relative to July. The Fed has shifted focus from the pace of hikes to the level and duration of restrictive policy, signaling that the terminal rate is now expected to be higher and that rate cuts are off the table for the foreseeable future. The next decision is likely another 75bp hike, with risks tilted toward an even higher terminal rate.

What changed

More hawkish. The November 2022 document represents a significant hawkish repricing relative to July. The Fed has shifted focus from the pace of hikes to the level and duration of restrictive policy, signaling that the terminal rate is now expected to be higher and that rate cuts are off the table for the foreseeable future. The next decision is likely another 75bp hike, with risks tilted toward an even higher terminal rate.

Inflation — More hawkish. Inflation rhetoric escalated: prior noted elevated numbers, current warns of a more challenging picture, rising short-term expectations, and explicitly links persistent inflation to the need for more restrictive policy, shifting risk balance toward overtightening.
Labour Market — More hawkish. Labour market language hardened: prior described extreme tightness, current adds that wage growth remains inconsistent with the 2% target and dismisses signs of softening, reinforcing the need for further tightening.
Rate Path — More hawkish. Rate path guidance pivoted decisively hawkish: prior included a dovish signal about eventual slowing, while current downplays pace moderation, emphasizes higher terminal rate and longer duration, explicitly rejects a pause, and adopts asymmetric risk favoring overtightening over easing.
Balance Sheet — Little changed. No balance sheet passages in either document; no directional signal.

Key wording

27 July 2022

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.
rate path: Rate hike decision - 75bp as expected, but level now at neutral estimate.

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.
rate path: Ongoing hikes confirmed but pace data-dependent, leaving optionality.

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.
rate path: Open to another 75bp in September if inflation persists.

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.
rate path: First explicit signal of eventual slowdown in hiking pace, a potential pivot.

This process is likely to involve a period of below-trend economic growth and some softening in labor market conditions.
rate path: Acknowledges recession risk as necessary cost of lowering inflation.

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
inflation: Highlights inflation still far above target and exceeding expectations.

2 November 2022

Today, the FOMC raised our policy interest rate by 75 basis points. And we continue to anticipate that ongoing increases will be appropriate.
rate path: Rate hike and signal of further hikes.

Restoring price stability will likely require maintaining a restrictive stance of policy for some time.
rate path: Signals rates will stay high.

At some point—as I’ve said in the last two press conferences—it will become appropriate to slow the pace of increases as we approach the level of interest rates that will be sufficiently restrictive to bring inflation down to our 2 percent goal. Even so, we still have some ways to go, and incoming data since our last meeting suggest that the ultimate level of interest rates will be higher than previously expected.
rate path: Slowing possible but terminal rate revised up.

We need to bring our policy stance down to a level that's sufficiently restrictive to bring inflation down to our 2 percent objective over the medium term.
rate path: Emphasizes need for restrictive policy, signaling further tightening.

incoming data between the meetings, both a strong labor market report but particularly the CPI report, do suggest to me that we may ultimately move to higher levels than we thought at the time of the September meeting.
rate path: Suggests terminal rate may be higher than previously expected, a hawkish surprise.

Shorter-term inflation expectations moved up between the last meeting and this meeting, and we don’t think those are as indicative, but they may be important in the wage-setting process. There’s a school of thought that believes that. So that’s very concerning.
inflation: Rising short-term inflation expectations seen as risk to wage-setting, supporting need for action.

Official documents

Background reading

27 July 2022 press conference · 2 November 2022 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology