Federal Reserve Press conference comparison — 21 September 2022 vs 14 December 2022

This Federal Reserve press conference comparison covers 21 September 2022 and 14 December 2022. Overall, the newer document was more hawkish. The December meeting delivered a 50bp hike (down from 75bp) but raised the terminal rate projection to 5.1% and emphasized higher-for-longer, maintaining a hawkish overall stance. The next decision is likely a 25bp hike, with the Committee focused on the ultimate level and duration of restrictive policy rather than the pace of tightening.

What changed

More hawkish. The December meeting delivered a 50bp hike (down from 75bp) but raised the terminal rate projection to 5.1% and emphasized higher-for-longer, maintaining a hawkish overall stance. The next decision is likely a 25bp hike, with the Committee focused on the ultimate level and duration of restrictive policy rather than the pace of tightening.

Inflation — Little changed. Prior message focused on inflation remaining elevated with no improvement; current acknowledges welcome reduction in monthly pace but maintains that inflation is far from target and core services are persistent – no material shift in overall stance.
Labour Market — More hawkish. Prior document had no explicit labour-market characterization; current highlights a very strong labour market that requires cooling to reduce sticky services inflation, adding an explicit hawkish dimension.
Rate Path — More hawkish. Both documents signal ongoing hikes and higher terminal rates with a high bar for cuts; current adds a step-down in pace but raises the terminal projection and emphasizes higher-for-longer, reinforcing hawkishness.
Balance Sheet — Little changed. No balance-sheet language in either document; no shift detected.

Key wording

21 September 2022

Today the FOMC raised its policy interest rate by ¾ percentage point, and we anticipate that ongoing increases will be appropriate.
rate path: Confirms 75bp hike and signals further hikes are coming.

We are moving our policy stance purposefully to a level that will be sufficiently restrictive to return inflation to 2 percent.
rate path: Emphasizes commitment to restrictive policy, not just neutral.

Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy.
rate path: Explicit warning against rate cuts; rates will stay high.

As shown in the SEP, 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 and declines to 2.9 percent by the end of 2025, still above the median estimate of its longer-run value.
rate path: Higher terminal rate path than June; rates above neutral for years.

Participants continue to see risks to inflation as weighted to the upside.
rate path: Inflation risks skewed higher, justifying more tightening.

Reducing inflation is likely to require a sustained period of below-trend growth, and there will very likely be some softening of labor market conditions.
inflation: Acknowledges recession risk and higher unemployment as cost of fighting inflation.

14 December 2022

Today, the FOMC raised our policy interest rate by ½ percentage point. We continue to anticipate that ongoing increases will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.
rate path: 50bp hike confirms tightening; ongoing increases signal further hikes ahead.

In light of the cumulative tightening of monetary policy and the lags with which monetary policy affects economic activity and inflation, the Committee decided to raise interest rates by 50 basis points today, a step-down from the 75 basis point pace seen over the previous four meetings. Of course, 50 basis points is still a historically large increase, and we still have some ways to go.
rate path: Step-down signals moderation in pace, but 'still have some ways to go' keeps tightening bias.

As shown in the SEP, the median projection for the appropriate level of the federal funds rate is 5.1 percent at the end of next year, ½ percentage point higher than projected in September.
rate path: Higher terminal rate projection implies rates will stay higher for longer.

The historical record cautions strongly against prematurely loosening policy. We will stay the course until the job is done.
rate path: Signals Fed will not ease prematurely, reinforcing commitment to restrictive stance.

I would say it’s our judgment today that we’re not at a sufficiently restrictive policy stance yet, which is why we say that we would expect that ongoing hikes would be appropriate. And I would point you to the SEP again for our current assessment of what that peak level will be. As you will have seen, 19 people filled out the SEP this time, and 17 of those 19 wrote down a peak rate of 5 percent or more—in the 5s.
rate path: Explicitly not yet restrictive enough; median peak rate rises to 5%+, above market expectations.

The inflation data received so far for October and November show a welcome reduction in the monthly pace of price increases. But it will take substantially more evidence to give confidence that inflation is on a sustained downward path.
inflation: Cautious welcome of lower inflation; need for more evidence keeps Fed alert.

Official documents

Background reading

21 September 2022 press conference · 14 December 2022 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology