Federal Reserve Press conference comparison — 13 December 2023 vs 31 January 2024

This Federal Reserve press conference comparison covers 13 December 2023 and 31 January 2024. Overall, the newer document was more dovish. The January 2024 FOMC communication signals a clear dovish tilt on rate path and balance sheet, while maintaining a hawkish vigilance on inflation. The next decision will likely hold rates steady, with the committee setting the stage for a mid-year cut if inflation data cooperate.

What changed

More dovish. The January 2024 FOMC communication signals a clear dovish tilt on rate path and balance sheet, while maintaining a hawkish vigilance on inflation. The next decision will likely hold rates steady, with the committee setting the stage for a mid-year cut if inflation data cooperate.

Inflation — More hawkish. Current document emphasizes the risk that inflation may stabilize above 2%, a more hawkish tone compared to prior's cautious progress acknowledgment.
Labour Market — More dovish. Labour market characterization softened from 'remains tight' to 'at or nearing normal', indicating reduced urgency on the employment front.
Rate Path — More dovish. Current explicitly states policy rate is at its peak and it will likely be appropriate to begin cutting later this year, a dovish shift from prior's mix of hawkish and neutral signals.
Balance Sheet — More dovish. Current introduces discussions of balance sheet tapering and flexibility on runoff, a dovish development from prior's commitment to continued reduction.

Key wording

13 December 2023

The Committee decided at today’s meeting to maintain the target range for the federal funds rate at 5¼ to 5½ percent and to continue the process of significantly reducing our securities holdings.
rate path: Key policy decision: rates unchanged, balance sheet reduction continues.

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 toward our 2 percent inflation objective is not assured. We are prepared to tighten policy further if appropriate.
rate path: Signals peak but keeps a tightening bias, emphasizing uncertainty and readiness to hike.

While participants do not view it as likely to be appropriate to raise interest rates further, neither do they want to take the possibility off the table.
rate path: Explicitly says further hikes are unlikely but not ruled out.

If the economy evolves as projected, the median participant projects that the appropriate level of the federal funds rate will be 4.6 percent at the end of 2024, 3.6 percent at the end of 2025, and 2.9 percent at the end of 2026, still above the median longer-term rate.
rate path: Implies 75bps of cuts in 2024, a dovish signal compared to previous SEP.

Inflation has eased over the past year but remains above our longer-run goal of 2 percent. Based on the consumer price index and other data, we estimate that total PCE prices rose 2.6 percent over the 12 months ending in November and that, excluding the volatile food and energy categories, core PCE prices rose 3.1 percent.
inflation: Current inflation data: headline 2.6%, core 3.1%.

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 calls for more evidence before confidence grows.

31 January 2024

Today, the FOMC decided to leave our policy interest rate unchanged and to continue to reduce our securities holdings.
rate path: Rate hold as expected; reaffirms current stance.

As labor market tightness has eased and progress on inflation has continued, the risks to achieving our employment and inflation goals are moving into better balance.
rate path: Dual risks more balanced, reducing urgency for immediate action.

We believe that our policy rate is likely at its peak for this tightening cycle and that, if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year.
rate path: Explicitly flags rate cuts later this year, conditional on economic evolution.

The Committee does not expect that it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.
rate path: No cut until confidence in sustainable inflation, pushing back on near-term easing.

Inflation has eased notably over the past year but remains above our longer-run goal of 2 percent.
inflation: Progress acknowledged but not yet at target.

We have six months of good inflation data. The question really is, that six months of good inflation data—is it sending us a true signal that we are, in fact, on a path—a sustainable path down to 2 percent inflation?
inflation: Acknowledges good data but questions sustainability, delaying rate cuts.

Official documents

Background reading

13 December 2023 press conference · 31 January 2024 press conference · Earlier meeting · Later meeting · Previous comparison · Next comparison · Methodology