Federal Reserve Press conference comparison — 20 March 2024 vs 31 July 2024

This Federal Reserve press conference comparison covers 20 March 2024 and 31 July 2024. Overall, the newer document was more dovish. The July 2024 FOMC document represents a clear dovish pivot relative to March, with inflation progress broadening and labor market risks elevated, opening the door to a September rate cut. The next decision likely hinges on incoming data, but the Committee's rhetoric has shifted decisively toward easing.

What changed

More dovish. The July 2024 FOMC document represents a clear dovish pivot relative to March, with inflation progress broadening and labor market risks elevated, opening the door to a September rate cut. The next decision likely hinges on incoming data, but the Committee's rhetoric has shifted decisively toward easing.

Inflation — More dovish. Current document acknowledges notable easing and broadening disinflation, while prior stressed lack of confidence and persistent above-target inflation.
Labour Market — More dovish. Current document expresses explicit concern about further cooling and downside risks, a shift from prior's more balanced view of strong but normalizing labor market.
Rate Path — More dovish. Current document explicitly opens door to September cut and signals approaching easing, contrasting with prior's emphasis on waiting for greater confidence and delaying cuts.
Balance Sheet — Little changed. No new balance sheet passages in current document; prior's discussion of slowing QT pace remains unchanged in stance.

Key wording

20 March 2024

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: Balanced risks allow for eventual easing.

Inflation has eased notably over the past year but remains above our longer-run goal of 2 percent.
inflation: Inflation still above target, progress noted but incomplete.

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: Signals cuts later this year, conditional on evolution.

The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably down toward 2 percent.
rate path: Delays cuts until confidence on inflation sustainability.

I take the two of them together, and I think they haven't really changed the overall story, which is that of inflation moving down gradually on a sometimes-bumpy road toward 2 percent. I don't think that story has changed. I also don't think that those readings added to anyone's confidence that we're moving closer to, to that point.
inflation: Inflation story intact but confidence not increased; keeps rate cuts conditional on further data.

the Committee wants to see more data that gives us higher confidence that inflation is moving down sustainably toward 2 percent. I also mentioned—and we don’t see this in the data right now, but if there were a significant weakening in the data, particularly in the labor market, that could also be a reason for us to begin the process of reducing rates.
rate path: Conditional guidance: cuts depend on more disinflation or labor weakness; not imminent but door open.

31 July 2024

We’ve stated that we do not expect it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2 percent. The second quarter’s inflation readings have added to our confidence, and more good data would further strengthen that confidence.
rate path: Opens door to cuts as confidence grows; Q2 data helped.

Inflation has eased notably over the past two years but remains somewhat above our longer-run goal of 2 percent. Total PCE prices rose 2.5 percent over the 12 months ending in June; excluding the volatile food and energy categories, core PCE prices rose 2.6 percent.
inflation: Inflation still above target but moving in right direction.

The broad sense of the Committee is that the economy is moving closer to the point at which it will be appropriate to reduce our policy rate. ... If that test is met, a reduction in our policy rate could be on the table as soon as the next meeting in September.
rate path: Explicitly flags September as possible cut date.

So if we were to see, for example, inflation moving down quickly or more or less in line with expectations, growth remains, let’s say, reasonably strong, and the labor market remains, you know, consistent with its current condition, then I would think that a, a rate cut could be on the table at the September meeting.
rate path: Opens door to September cut with conditions, signaling easing bias.

we’re also now seeing progress in the other two big categories: nonhousing services and housing services.
inflation: Inflation progress is broadening beyond goods.

If, if inflation were to prove, you know, sticky and we were to see higher readings from inflation, disappointing readings, we would weigh that along with the other things.
rate path: Acknowledges risk of sticky inflation delaying cuts, balancing guidance.

Official documents

Background reading

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