Federal Reserve Press conference comparison — 1 February 2023 vs 22 March 2023

This Federal Reserve press conference comparison covers 1 February 2023 and 22 March 2023. Overall, the newer document was more dovish. The Fed delivered a 25bp hike but significantly softened forward guidance, replacing 'ongoing increases' with 'some additional policy firming may be appropriate' and highlighting that credit tightening from banking stress can substitute for rate hikes. The net effect is a dovish pivot in rate path outlook, making a pause likely at the next meeting unless inflation data surprises to the upside.

What changed

More dovish. The Fed delivered a 25bp hike but significantly softened forward guidance, replacing 'ongoing increases' with 'some additional policy firming may be appropriate' and highlighting that credit tightening from banking stress can substitute for rate hikes. The net effect is a dovish pivot in rate path outlook, making a pause likely at the next meeting unless inflation data surprises to the upside.

Inflation — More hawkish. Prior acknowledged 'welcome reduction' but needed more evidence; current stresses inflation 'remains well above' target and the process 'has a long way to go' — a clear hawkish escalation.
Labour Market — More dovish. Prior exclusively highlighted 'extremely tight' labour market; current adds that 'softening in labor market conditions' is likely needed — a subtle dovish shift in tolerance for weakness.
Rate Path — More dovish. Prior guidance committed to 'ongoing increases'; current replaces with 'some additional policy firming may be appropriate' and cites credit tightening as a substitute for rate hikes — a net dovish easing in forward guidance despite pushback on rate cuts.
Balance Sheet — Little changed. No prior balance sheet signal; current notes temporary expansion is not monetary policy — no directional shift.

Key wording

1 February 2023

Today, the FOMC raised our policy interest rate by 25 basis points.
rate path: Explicit rate hike decision; expected but confirms tightening continues.

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: Strong signal that more hikes are coming; no pause yet.

The labor market remains extremely tight, with the unemployment rate at a 50-year low, job vacancies still very high, and wage growth elevated.
labour market: Tight labor market adds upward pressure on inflation, justifying further tightening.

The inflation data received over the past three months show a welcome reduction in the monthly pace of increases. And, while recent developments are encouraging, we will need substantially more evidence to be confident that inflation is on a sustained downward path.
inflation: Acknowledges improvement but demands more proof; conditions continued tightening.

The historical record cautions strongly against prematurely loosening policy. We will stay the course, until the job is done.
rate path: Explicit warning against rate cuts; commitment to keep rates high.

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 25 basis points today, continuing the step-down from last year’s rapid pace of increases. Shifting to a slower pace will better allow the Committee to assess the economy’s progress toward our goals as we determine the extent of future increases that will be required to attain a sufficiently restrictive stance.
rate path: Explains downshift to 25bp; keeps door open for further hikes based on data.

22 March 2023

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.
rate path: Confirms 25bp hike despite banking stress.

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.
rate path: Softens guidance from 'will' to 'may', signaling optionality to pause.

Yet the labor market remains extremely tight.
labour market: Tight labor market adds to inflation pressure, supports further tightening.

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.
inflation: Inflation persistence keeps Fed vigilant despite banking issues.

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.
rate path: Credit tightening acts like rate hikes, reducing need for further policy tightening.

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.
rate path: 25bp hike delivered but guidance softened from 'ongoing' to 'some additional', signaling uncertainty.

Official documents

Background reading

1 February 2023 press conference · 22 March 2023 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology