Fed Monitor: Watch What the Fed Does, Not What It Says

In this short piece, I summarise the key issues ahead of the next Fed meeting, outline the most recent FOMC comments, and provide a visual summary of the latest data impacting Fed policy.

Summary of Key Issues

The evolution of the SEP end-2023 inflation and unemployment forecasts shows the Fed is much more focused on the employment part of its mandate than the inflation part (Chart 1).   

Chair Powell announced at the July meeting that the FOMC was slowing the pace of rate hikes. This has made me expect a rate hike every other meeting from previously every meeting, i.e., a rate hike in July and November. I reviewed the meeting in full here.

Meanwhile, the tightening of credit conditions remains in line with previous Fed tightening cycles, and credit demand is weakening (Charts 8 and 9). 

Falling energy prices continue to mask strong underlying inflation dynamics (Charts 10-13).

Latest statement

Latest minutes

Current Fed Forecast

Recent FOMC Comments

Markets Under-Pricing the Fed

Economic Data Still Calls for More Fed Tightening

Dominique Dwor-Frecaut is a macro strategist based in Southern California. She has worked on EM and DMs at hedge funds, on the sell side, the NY Fed, the IMF, and the World Bank. She joined Macro Hive soon after its inception.

(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)