Federal Reserve Press conference comparison — 20 September 2023 vs 13 December 2023

This Federal Reserve press conference comparison covers 20 September 2023 and 13 December 2023. Overall, the newer document was more dovish. The December FOMC statement marks a clear dovish pivot from September: the committee now views rates as likely at or near their peak, opens the door to cuts, and acknowledges significant disinflation progress. For the next decision, the Fed will likely hold rates steady while monitoring data, with the bias shifting toward eventual easing rather than further tightening.

What changed

More dovish. The December FOMC statement marks a clear dovish pivot from September: the committee now views rates as likely at or near their peak, opens the door to cuts, and acknowledges significant disinflation progress. For the next decision, the Fed will likely hold rates steady while monitoring data, with the bias shifting toward eventual easing rather than further tightening.

Inflation — More dovish. Inflation progress is acknowledged as real and broad-based, but the committee remains cautious about declaring victory, shifting from September's emphasis on 'long way to go' to a more balanced assessment.
Labour Market — More dovish. Labour market language softens from 'tight but rebalancing' to 'significant progress toward greater balance', with additional acknowledgement of wages still above target but overall softening.
Rate Path — More dovish. Rate path pivots from 'prepared to raise further' and higher SEP projections to explicit discussion of rate cuts as the next question, with 'at or near peak' language and a base case of no more hikes.
Balance Sheet — Little changed. No change to balance sheet policy; QT pace remains unchanged and independent of rate decisions.

Key wording

20 September 2023

Nevertheless, the progress—process of getting inflation sustainably down to 2 percent has a long way to go.
inflation: Powell emphasizes inflation still far from target, justifying tight policy.

If the economy evolves as projected, the median participant projects that the appropriate level of the federal funds rate will be 5.6 percent at the end of this year, 5.1 percent at the end of 2024, and 3.9 percent at the end of 2025.
rate path: SEP shows higher for longer: 2024 median up 50bp from June, signaling fewer cuts.

We’re prepared to raise rates further if appropriate, and we intend to hold policy at a restrictive level until we’re confident that inflation is moving down sustainably toward our objective.
rate path: Hike risk remains alive; restrictive stance will persist until inflation convincingly falls.

We decided to maintain the target range for the federal funds rate where it is—at 5¼ to 5½ percent—while continuing to reduce our securities holdings.
rate path: No rate change this meeting; balance sheet reduction continues.

If you looked at the SEP, as you—as you obviously will have done, you will see that a majority of participants believe that it is more likely than not that we will—that it will be appropriate for us to raise rates one more time in the two remaining meetings this year.
rate path: Majority of FOMC members project one more hike in 2023.

economic activity’s been stronger than we expected—stronger than I think everyone expected. And, and so what you’re—what you’re seeing is, this is what people believe, as of now, will be appropriate to achieve what we’re looking to achieve, which is progress toward our—toward our inflation goal, as you see in the SEP.
rate path: Stronger economic activity justifies higher rate projections.

13 December 2023

The lower inflation readings over the past several months are welcome, but we will need to see further evidence to build confidence that inflation is moving down sustainably toward our goal.
inflation: Acknowledges progress but emphasizes need for more data before declaring victory.

While we believe that our policy rate is likely at or near its peak for this tightening cycle, the economy has surprised forecasters in many ways since the pandemic, and ongoing progress—sorry—ongoing progress toward our 2 percent inflation objective is not assured. We are prepared to tighten policy further if appropriate.
rate path: Signals peak but leaves door open for further hikes; market focus on 'near peak' vs. 'prepared to tighten'.

Participants didn’t write down additional hikes that we believe are likely, so that’s what we wrote down. But participants also didn’t want to take the possibility of further hikes off the table.
rate path: Conditional language: peak likely but not guaranteed, keeps optionality for hikes.

When it will become appropriate to begin dialing back the amount of policy restraint that’s in place. So that’s really the next question, and that’s what people are thinking about and, and talking about.
rate path: First explicit acknowledgment that rate cuts are the next discussion, a major dovish pivot.

And you see that people are not writing down rate hikes. That’s, that’s us thinking that we have done enough but not, not feeling that really strongly, confidently and not wanting to take the possibility of a rate hike off the table. Nonetheless, it’s not the base case anymore, obviously, as it was, you know, 60, 90 days ago.
rate path: Base case is no more hikes, and discussion of cuts is on the table; clearly dovish pivot.

That could mean we need to keep rates higher for longer. It could even mean, ultimately, that we would need to hike again.
rate path: Explicitly warns that strong growth could delay cuts or even require hikes; key for rate expectations.

Official documents

Background reading

20 September 2023 press conference · 13 December 2023 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology