Federal Reserve Press conference comparison — 14 December 2022 vs 22 March 2023
This Federal Reserve press conference comparison covers 14 December 2022 and 22 March 2023. Overall, the newer document was mixed. The Fed delivered a 25bp hike but softened forward guidance significantly, shifting from a committed path to a conditional one, citing credit tightening as a substitute. This signals a pivot toward a more cautious stance pending data, while maintaining inflation commitment.
What changed
Mixed. The Fed delivered a 25bp hike but softened forward guidance significantly, shifting from a committed path to a conditional one, citing credit tightening as a substitute. This signals a pivot toward a more cautious stance pending data, while maintaining inflation commitment.
- Inflation — More hawkish. Inflation assessment shifted from acknowledging welcome reduction but requiring more evidence to emphasizing that inflation remains well above target with a long way to go and a bumpy path.
- Labour Market — Little changed. Labour market description remains hawkish (extremely tight) but adds that softening is needed to reduce inflation, essentially maintaining the prior characterization.
- Rate Path — More dovish. Forward guidance softened from 'ongoing increases will be appropriate' to 'some additional policy firming may be appropriate,' and credit tightening is seen as potentially substituting for rate hikes.
- Balance Sheet — Little changed. Balance sheet expansion is described as temporary lending not altering monetary policy stance, with no material change from prior document.
Key wording
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.
Restoring price stability will likely require maintaining a restrictive policy stance for some time.
participants continue to see risks to inflation as weighted to the upside.
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 labor market continues to be out of balance, with demand substantially exceeding the supply of available workers.
At today’s meeting, the Committee raised the target range for the federal funds rate by ¼ percentage point, bringing the target range to 4¾ to 5 percent.
As a result, we no longer state that we anticipate that ongoing rate increases will be appropriate to quell inflation; instead, we now anticipate that some additional policy firming may be appropriate.
We also assess, as I mentioned, that the events of the last two weeks are likely to result in some tightening credit conditions for households and businesses and thereby weigh on demand, on the labor market, and on inflation. Such a tightening in financial conditions would work in the same direction as rate tightening. In principle, as a matter of fact, you can think of it as being the equivalent of a rate hike or perhaps more than that; of course, it’s not possible to make that assessment today with any precision whatsoever.
So our decision was to move ahead with the 25 basis point hike and to change our guidance, as I mentioned, from ongoing hikes to some, some additional hikes maybe—some policy firming may be appropriate.
Inflation remains well above our longer-run goal of 2 percent. The process of getting inflation back down to 2 percent has a long way to go and is likely to be bumpy.
Yet the labor market remains extremely tight.
Official documents
Background reading
Related
14 December 2022 press conference · 22 March 2023 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology
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