Federal Reserve Press conference comparison — 2 November 2022 vs 14 December 2022
This Federal Reserve press conference comparison covers 2 November 2022 and 14 December 2022. Overall, the newer document was mixed. The December meeting delivers a hawkish repricing: the Fed slows the pace of hikes but raises the terminal rate projection and stresses that rates will stay high for longer. The next decision likely continues with 25bp steps until rates reach the new higher terminal level, with no cuts in sight.
What changed
Mixed. The December meeting delivers a hawkish repricing: the Fed slows the pace of hikes but raises the terminal rate projection and stresses that rates will stay high for longer. The next decision likely continues with 25bp steps until rates reach the new higher terminal level, with no cuts in sight.
- Inflation — More dovish. Acknowledges welcome reduction in monthly inflation but cautions more evidence needed; prior had no positive note.
- Labour Market — Little changed. Labour market described as 'extremely tight' in prior and 'clearly very strong' in current; no material shift in stance.
- Rate Path — More hawkish. Raises median terminal rate projection to 5.1%, emphasizes higher-for-longer, and sets high bar for rate cuts, a hawkish shift from prior's conditional slowing pace.
- Balance Sheet — Little changed. No balance sheet language in either document; no shift.
Key wording
Today, the FOMC raised our policy interest rate by 75 basis points. And we continue to anticipate that ongoing increases will be appropriate.
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.
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.
Inflation remains well above our longer-run goal of 2 percent. ... And the recent inflation data again have come in higher than expected.
Despite the slowdown in growth, the labor market remains extremely tight, with the unemployment rate at a 50-year low, job vacancies still very high, and wage growth elevated.
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.
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.
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.
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.
the big question is, when we—how much will you see from the largest, the 55 percent of the index, which is the non-housing services sector? And, you know, that’s where you need to see—we believe you need to see a better balancing of supply and demand in the labor market so that you have—it’s not that we don’t want wage increases. We want strong wage increases. We just want them to be at a level that’s consistent with 2 percent inflation.
Official documents
Background reading
Related
2 November 2022 press conference · 14 December 2022 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology
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