September 20, 2023
July 26, 2023
Jerome H. Powell
September 20, 2023 FOMC Statement
FOMC statement
Federal Reserve issues FOMC statement
For release at 2:00 p.m. EDT
Recent indicators suggest that economic activity has been expanding at a moderate solid pace. Job gains have been robust slowed in recent months, months but remain strong, and the unemployment rate has remained low. Inflation remains elevated.
The U.S. banking system is sound and resilient. Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise maintain the target range for the federal funds rate to at 5-1/4 to 5-1/2 percent. The Committee will continue to assess additional information and its implications for monetary policy. In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans. The Committee is strongly committed to returning inflation to its 2 percent objective.
In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Lisa D. Cook; Austan D. Goolsbee; Patrick Harker; Philip N. Jefferson; Neel Kashkari; Adriana D. Kugler; Lorie K. Logan; and Christopher J. Waller.
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Implementation Note issued July 26, September 20, 2023
Our summary
What changed
- The FOMC decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent, instead of raising it.
- The description of economic activity was upgraded from 'moderate pace' to 'solid pace'.
- The characterization of job gains was revised from 'robust' to 'slowed in recent months but remain strong'.
- The voting roster changed: Adriana D. Kugler replaced an unnamed member, with all 12 voting in favor.
Implications
The shift to a hold signals a pause in the tightening cycle, with the FOMC assessing the cumulative effects of prior hikes.
The upgraded economic activity language and softened job gains description suggest a resilient but cooling labor market, which may support a patient approach to future policy moves.
Summary generated automatically from the statements. Not investment advice.
Projections
| 2023 | 2024 | 2025 | 2026 | Longer run | |
|---|---|---|---|---|---|
| Real GDP growth | 2.1 was 1.0 | 1.5 was 1.1 | 1.8 | 1.8 | 1.8 |
| Unemployment rate | 3.8 was 4.1 | 4.1 was 4.5 | 4.1 was 4.5 | 4.0 | 4.0 |
| PCE inflation | 3.3 was 3.2 | 2.5 | 2.2 was 2.1 | 2.0 | 2.0 |
| Core PCE inflation | 3.7 was 3.9 | 2.6 | 2.3 was 2.2 | 2.0 | |
| Federal funds rate | 5.6 | 5.1 was 4.6 | 3.9 was 3.4 | 2.9 | 2.5 |
Median projections of FOMC participants; previous: June.
Each dot is one participant's projection of the federal funds rate (%) at the end of each year and in the longer run.
September June median June median
Scroll the chart sideways for the later years.
Implementation Note
The settings that put the decision into effect: the interest rate paid on reserves, the FOMC's instructions to the New York Fed's trading desk, and the discount rate. Changes are marked the same way as in the statement.
- The Board of Governors of the Federal Reserve System voted unanimously to
raisemaintain the interest rate paid on reserve balancestoat 5.4 percent, effectiveJuly 27,September 21, 2023. - As part of its policy decision, the Federal Open Market Committee voted to direct the Open Market Desk at the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the System Open Market Account in accordance with the following domestic policy directive: "Effective
July 27,September 21, 2023, the Federal Open Market Committee directs the Desk to: - Undertake open market operations as necessary to maintain the federal funds rate in a target range of 5-1/4 to 5-1/2 percent.
- Conduct standing overnight repurchase agreement operations with a minimum bid rate of 5.5 percent and with an aggregate operation limit of $500 billion.
- Conduct standing overnight reverse repurchase agreement operations at an offering rate of 5.3 percent and with a per-counterparty limit of $160 billion per day.
- Roll over at auction the amount of principal payments from the Federal Reserve's holdings of Treasury securities maturing in each calendar month that exceeds a cap of $60 billion per month. Redeem Treasury coupon securities up to this monthly cap and Treasury bills to the extent that coupon principal payments are less than the monthly cap.
- Reinvest into agency mortgage-backed securities (MBS) the amount of principal payments from the Federal Reserve's holdings of agency debt and agency MBS received in each calendar month that exceeds a cap of $35 billion per month.
- Allow modest deviations from stated amounts for reinvestments, if needed for operational reasons.
- Engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions."
- In a related action, the Board of Governors of the Federal Reserve System voted unanimously to approve the establishment of the primary credit rate at the existing level of 5.5 percent.
In a related action, the Board of Governors of the Federal Reserve System voted unanimously to approve a 1/4 percentage point increase in the primary credit rate to 5.5 percent, effective July 27, 2023. In taking this action, the Board approved requests to establish that rate submitted by the Boards of Directors of the Federal Reserve Banks of Boston, Philadelphia, Cleveland, Richmond, Chicago, St. Louis. Minneapolis, Kansas City, Dallas, and San Francisco.
Press conference
September 20, 2023, 2:30 p.m. ET · Read the transcript
What Powell said that the statement didn't
- The chair said the median SEP projection for the federal funds rate is 5.6 percent at the end of 2023, 5.1 percent at the end of 2024, and 3.9 percent at the end of 2025, with the 2024 and 2025 medians revised up by half a percentage point from June.
- The chair said a majority of FOMC participants believe it is more likely than not that one more rate hike will be appropriate in the two remaining meetings this year, while seven participants wrote down no hike.
- The chair said real interest rates are now "well above" mainstream estimates of the neutral policy rate, but acknowledged uncertainty in gauging the stance of policy.
- The chair said the stronger economic activity, not increased inflation persistence, is the main reason for the higher projected rate path, and that it is "certainly plausible" the neutral rate is higher than the longer-run rate.
- The chair said the labor market has shown "meaningful rebalancing" without an increase in unemployment, but declined to call a soft landing a baseline expectation, noting below-trend growth and some labor market softening are likely required.
Summary generated automatically from the transcript and the statement.