FOMC Preview
September 20, 2023
Today’s is the sixth of eight scheduled policy meetings in 2023. After ten straight interest rate hikes beginning in March 2022, the Federal Open Market Committee left the federal funds target unchanged at this year’s June meeting but implemented an 11th increase at the subsequent meeting eight weeks ago. Compared to the pandemic low range of zero to 0.25%, the target range is now 525 basis points higher at 5.25-5.50%. This has been the largest tightening cycle since the Volcker-led attack on inflation slightly over four decades ago.
Market participants expect one more rate increase in 2023 and do not anticipate that it will be done today. The last updated forecasts published by the FOMC implied two moves in the second half of 2023, cuts totaling 100 bps in 2024, and a further reduction of about 125 bps in 2025. Comments by Fed officials have reinforced the view that the appropriate degree of restraint to meet the committee’s mandates is not yet in place but that it is close at hand and that barring compelling incoming data, pauses between tightenings will occur in order to better assess the impact of the considerable tightening that is now in place.
New forecasts will be released at 18:00 GMT today. The last forecasts from June 14th, projected GDP growth of 1.0% in 2023, 1.1% next year and 1.8% in 2025; PCE infration of 3.2% this year, 2.5% next ear and 2.1% in 2025; core PCE of 3.9% in 2023, 2.6% in 2024, and 2.2% in 2025; and unemployment rising to 4.1% late in 2023, then a plateau of 4.5% from late 2024 through the end of the forecast horizon in late 2025.
At the July 2023 meeting when the interest rate was lifted by 25 basis points, the pace of recent economic activity was upgraded to moderate from modest, comment about a tight labor market were repeated, and inflation was observed to be remaining “elevated.” Since that time, financial market conditions have tightened. The 44-basis point rise in the 10-year U.S. Treasury yield exceeds the 25-bp fed funds target increase made on July 26. The dollar has strengthened 4.9% against the yen and 3.3% relative to the euro. The DJIA has dropped 2.3%, and the price of oil has soared 14.7%. There’s no compelling reason for the Fed to call an audible and surprise investors with a rate hike today.
EUR/$ | $/JPY | 10Y, % | DJIA | Oil, $ | |
06/30/04 | 1.2173 | 109.44 | 4.63 | 10396 | 37.95 |
06/30/05 | 1.2090 | 110.89 | 3.96 | 10370 | 57.00 |
06/29/06 | 1.2527 | 116.07 | 5.20 | 11077 | 73.41 |
06/28/07 | 1.3452 | 123.17 | 5.10 | 13456 | 69.82 |
08/07/07 | 1.3749 | 118.55 | 4.73 | 13510 | 72.27 |
09/18/07 | 1.3888 | 115.75 | 4.51 | 13475 | 81.42 |
10/31/07 | 1.4458 | 115.28 | 4.42 | 13873 | 93.59 |
12/11/07 | 1.4682 | 111.49 | 4.11 | 13645 | 89.78 |
01/30/08 | 1.4792 | 107.31 | 3.70 | 12454 | 91.70 |
03/18/08 | 1.5786 | 98.73 | 3.41 | 12257 | 107.53 |
04/30/08 | 1.5562 | 104.58 | 3.83 | 12953 | 111.54 |
06/25/08 | 1.5568 | 108.37 | 4.18 | 11837 | 133.62 |
08/05/08 | 1.5445 | 108.42 | 3.97 | 11484 | 119.82 |
09/16/08 | 1.4144 | 105.16 | 3.36 | 10936 | 91.18 |
10/08/08 | 1.3625 | 99.87 | 3.50 | 9447 | 87.02 |
10/29/08 | 1.2933 | 97.15 | 3.81 | 9145 | 67.38 |
12/16/08 | 1.3790 | 90.14 | 2.52 | 8687 | 44.14 |
01/28/09 | 1.3253 | 90.01 | 2.61 | 8356 | 42.92 |
03/18/09 | 1.3115 | 98.13 | 2.94 | 7340 | 47.73 |
04/29/09 | 1.3331 | 97.06 | 3.02 | 8194 | 51.05 |
06/24/09 | 1.3984 | 95.43 | 3.59 | 8373 | 68.76 |
08/12/09 | 1.4221 | 96.17 | 3.71 | 9366 | 70.64 |
09/23/09 | 1.4779 | 91.50 | 3.50 | 9859 | 69.13 |
11/04/09 | 1.4884 | 90.75 | 3.51 | 9896 | 80.66 |
12/16/09 | 1.4542 | 89.78 | 3.56 | 10478 | 73.14 |
01/27/10 | 1.4045 | 89.49 | 3.61 | 10148 | 73.31 |
03/16/10 | 1.3756 | 90.64 | 3.67 | 10645 | 81.45 |
04/28/10 | 1.3157 | 94.10 | 3.75 | 11043 | 82.57 |
06/23/10 | 1.2284 | 90.12 | 3.13 | 10307 | 76.50 |
08/10/10 | 1.3107 | 85.85 | 2.81 | 10605 | 79.94 |
09/21/10 | 1.3132 | 85.21 | 2.66 | 10747 | 73.05 |
11/03/10 | 1.4059 | 81.35 | 2.53 | 11174 | 84.59 |
12/14/10 | 1.3423 | 83.37 | 3.38 | 11497 | 88.47 |
01/26/11 | 1.3658 | 82.55 | 3.41 | 12001 | 87.36 |
03/15/11 | 1.3969 | 81.04 | 3.29 | 11815 | 98.09 |
04/27/11 | 1.4665 | 82.63 | 3.36 | 12612 | 112.48 |
06/22/11 | 1.4392 | 80.12 | 2.97 | 12175 | 94.87 |
08/09/11 | 1.4234 | 77.09 | 2.36 | 10993 | 81.76 |
09/21/11 | 1.3778 | 76.34 | 1.93 | 11377 | 86.74 |
11/02/11 | 1.3724 | 78.11 | 2.03 | 11805 | 92.77 |
12/13/11 | 1.3067 | 77.92 | 1.98 | 12130 | 100.20 |
01/25/12 | 1.3027 | 77.96 | 1.97 | 12670 | 98.85 |
03/13/12 | 1.3096 | 82.76 | 2.08 | 13044 | 106.34 |
04/25/12 | 1.3226 | 81.37 | 1.97 | 13096 | 104.13 |
06/20/12 | 1.2693 | 79.28 | 1.66 | 12837 | 83.63 |
08/01/12 | 1.2300 | 78.10 | 1.49 | 13028 | 88.98 |
09/13/12 | 1.2895 | 77.43 | 1.72 | 13342 | 97.60 |
10/24/12 | 1.2948 | 79.75 | 1.77 | 13115 | 85.72 |
12/12/12 | 1.3082 | 83.24 | 1.70 | 13325 | 87.13 |
01/30/13 | 1.3584 | 91.16 | 2.02 | 13949 | 97.63 |
03/20/13 | 1.2948 | 95.65 | 1.94 | 14497 | 92.82 |
05/01/13 | 1.3195 | 97.48 | 1.62 | 14740 | 90.47 |
06/19/13 | 1.3364 | 95.76 | 2.23 | 15304 | 98.38 |
07/31/13 | 1.3301 | 97.92 | 2.67 | 15565 | 105.63 |
09/18/13 | 1.3363 | 98.28 | 2.76 | 15606 | 107.01 |
10/30/13 | 1.3764 | 98.18 | 2.48 | 15660 | 97.42 |
12/18/13 | 1.3696 | 103.81 | 2.89 | 16198 | 98.06 |
01/29/14 | 1.3651 | 102.13 | 2.73 | 15719 | 97.23 |
03/19/14 | 1.3918 | 101.75 | 2.71 | 16335 | 99.96 |
04/30/14 | 1.3868 | 102.11 | 2.66 | 16553 | 99.52 |
06/18/14 | 1.3584 | 101.93 | 2.61 | 16892 | 106.12 |
07/30/14 | 1.3372 | 102.84 | 2.51 | 16878 | 101.45 |
08/17/14 | 1.2961 | 107.60 | 2.57 | 17151 | 94.05 |
10/29/14 | 1.2677 | 108.40 | 2.33 | 16956 | 82.51 |
12/17/14 | 1.2409 | 117.58 | 2.11 | 17201 | 57.85 |
01/28/15 | 1.1337 | 117.77 | 1.78 | 17457 | 44.75 |
03/18/15 | 1.0637 | 120.98 | 2.05 | 17733 | 42.49 |
04/29/15 | 1.1164 | 118.67 | 2.05 | 18039 | 59.16 |
06/17/15 | 1.1255 | 124.22 | 2.39 | 17862 | 59.12 |
07/29/15 | 1.1073 | 123.61 | 2.29 | 17720 | 49.17 |
09/17/15
10/28/15 |
1.1334
1.1081 |
120.86
120.50 |
2.26
2.07 |
16778
17687 |
47.01
45.83 |
12/16/15
01/27/16 03/16/16 04/27/16 06/14/16 07/27/16 09/21/16 11/02/16 12/14/16 02/01/17 03/15/17 05/03/17 06/14/17 07/25/17 09/20/17 11/01/17 12/13/17 01/31/18 03/21/18 05/02/18 06/13/18 08/01/18 09/26/18 11/08/18 12/19/18 01/30/19 03/20/19 05/01/19 06/19/19 07/31/19 09/18/19 10/30/19 12/11/19 01/29/20 03/03/20 03/15/20 03/23/20 04/29/20 06/10/20 07/29/20 09/16/20 11/05/20 12/16/20 01/27/21 03/17/21 04/28/21 06/16/21 07/28/21 09/22/21 11/03/21 12/15/21 01/26/22 03/16/22 05/04/22 06/15/22 07/27/22 09/21/22 11/02/22 12/14/22 02/01/23 03/22/23 05/03/23 06/14/23 07/26/23 09/20/23 |
1.0956
1.0874 1.1089 1.1339 1.1205 1.0998 1.1160 1.1099 1.0641 1.0741 1.0638 1.0910 1.1149 1.1735 1.2010 1.1631 1.1815 1.2424 1.2271 1.1963 1.1788 1.1668 1.1765 1.1400 1.1420 1.1415 1.1355 1.1244 1.1217 1.1132 1.1066 1.1117 1.1112 1.1002 1.1179 1.1087 1.0697 1.0859 1.1367 1.1787 1.1824 1.1814 1.2174 1.2115 1.1908 1.2071 1.2126 1.1812 1.1722 1.1581 1.1255 1.1287 1.0983 1.0536 1.0438 1.0129 0.9884 0.9884 1.o686 1.0988 1.0792 1.1047 1.0860 1.1065 1.0709
|
121.72
118.48 113.70 111.37 106.15 105.65 100.84 103.33 115.37 113.52 114.48 112.47 111.55 111.17 111.34 113.91 112.58 109.31 106.27 109.91 110.38 111.69 112.94 113.88 112.26 109.55 111.42 111.17 108.36 108.59 108.16 108.89 108.62 109.14 107.21 108.33 111.26 106.73 107.24 104.84 105.00 103.68 103.65 104.07 109.27 108.80 109.97 110.09 109.23 114.01 113.98 114.36 118.62 130.10 133.82 137.31 144.08 146.93 134.86 128.93 132.57 135.22 139.38 140.82 147.78 |
2.29
2.02 1.99 1.89 1.62 1.53 1.70 1.78 2.45 2.49 2.57 2.30 2.13 2.29 2.24 2.35 2.34 2.73 2.89 2.97 2.96 2.99 3.08 3.23 2.81 2.72 2.57 2.48 2.08 2.02 1.75 1.80 1.80 1.61 1.01 1.01 0.81 0.61 0.77 0.59 0.67 0.77 0.91 1.01 1.66 1.62 1.49 1.25 1.31 1.56 1.45 1.78 2.19 2.98 3.34 2.77 3.56 4.03 3.51 3.41 3.54 3.37 3.79 3.89 4.33 |
17583
16002 17217 18013 17675 18461 18151 17989 19915 19890 20885 20920 21375 21711 22376 23405 24585 26259 24839 24095 25309 25310 26543 26195 23881 24841 25727 26624 26452 27210 27048 27067 27877 28833 25917 23185 18592 24667 27169 26467 28196 28418 30,125 30,554 32,868 33,908 34,251 34,938 34,279 35,894 35,493 34,594 33,726 33,242 30,806 31,846 30,850 32,524 34,175 34,093 32,466 33,689 34,108 35,418 34,608 |
35.95
30.85 37.79 44.89 48.29 41.91 43.44 45.18 51.83 53.33 48.43 47.96 44.71 48.75 50.55 54.24 56.60 64.41 65.00 67.57 66.77 67.62 71.68 60.93 47.80 54.51 59.48 63.38 53.65 58.48 58.16 54.60 58.68 53.52 47.18 31.73 23.36 15.30 39.05 41.22 40.00 38.84 47.77 52.81 64.30 63.70 72.32 74.25 71.94 81.14 70.39 87.40 95.70 107.71 116.24 97.36 83.70 88.57 77.56 76.80 70.32 68.70 69.38 78.93 90.51 |
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: FOMC preview