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The US Federal Reserve turned to a more hawkish stance in their September policy meeting, both in terms of details on tapering and their dot plots. The table below summarizes the FOMC meeting statement with the latest Dot Plot given below it.

Talking Points

Description

Changes from July’s statement

  • July 28,2021:
    • The sectors most adversely affected by the pandemic have shown improvement but have not fully recovered.
    • Inflation has risen, largely reflecting transitory factors
    • The economy has made progress toward these goals, and the Committee will continue to assess progress in coming meetings.
  • September 22, 2021:
    • The sectors most adversely affected by the pandemic have improved in recent months, but the rise in COVID-19 cases has slowed their recovery.
    • Inflation is elevated, largely reflecting transitory factors
    • If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted.

Dot Plots vs. June

  • June 16, 2021: 
    • 7 out of 18 members expect at least one rate hike next year
    • 2023 median FOMC dots at 0.625%. 13 FOMC members expect at least one rate hike by 2023
  • September 22, 2021:
    • 9 out of 18 members expect at least one rate hike next year
    • 2023 median FOMC dots at 1% . 17 FOMC members expect at least one rate hike by 2023
    • New 2024 FOMC dots are released. Median dots for 2024 is at 1.75%
    • Longer-term median dot is unchanged at 2.5%

Summary of Economic Projections (SEP)

  • Median Real GDP expected at 3.8% and 2.5% for 2022 and 2023
  • Median Unemployment rate expected at 3.8% and 3.5% for 2022 and 2023
  • Median Core PCE inflation expected at 2.2% for 2022 and 2023

On Tapering and Rate Hike Path

  • While no decisions are made on tapering, as the recovery remains on track, a gradual tapering process that concludes around the middle of next year is likely to be appropriate
  • The timing and pace of the reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate liftoff
  • Holdings of longer-term securities will keep financial conditions accommodative
  • Drawdown of the $120bn monthly bond purchases could begin after the November 2-3 policy meeting as long as job growth through September is reasonably strong (Press Conference)

 

For the statement, click here and for the SEP, click here

 

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