December 13, 2023
November 01, 2023
Jerome H. Powell
December 13, 2023 FOMC Statement
FOMC statement
Federal Reserve issues FOMC statement
For release at 2:00 p.m. EDT EST
Recent indicators suggest that growth of economic activity expanded at a has slowed from its strong pace in the third quarter. Job gains have moderated since earlier in the year but remain strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated.
The U.S. banking system is sound and resilient. Tighter financial and 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 maintain the target range for the federal funds rate 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 any 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 November 1, December 13, 2023
Our summary
What changed
- The FOMC noted that economic activity growth has slowed from its strong third-quarter pace, whereas the previous statement described strong expansion.
- The statement now says inflation has eased over the past year but remains elevated, replacing the prior language that inflation remains elevated.
- The forward guidance on policy firming was adjusted from 'the extent of additional policy firming' to 'the extent of any additional policy firming,' signaling a possible shift toward less tightening.
- The target range for the federal funds rate was maintained at 5-1/4 to 5-1/2 percent, and the balance sheet reduction plans were unchanged.
- The vote was unanimous, with the same 12 members voting for the action as in the previous statement.
Implications
The revised language suggests the FOMC is acknowledging a slowdown in growth and some progress on inflation, which could indicate a less hawkish stance.
The change to 'any additional policy firming' hints that further rate hikes may be less likely, potentially paving the way for a pause or eventual easing.
Markets might interpret the statement as a dovish tilt, reinforcing expectations that the tightening cycle may be nearing its end.
Summary generated automatically from the statements. Not investment advice.
Projections
| 2023 | 2024 | 2025 | 2026 | Longer run | |
|---|---|---|---|---|---|
| Real GDP growth | 2.6 was 2.1 | 1.4 was 1.5 | 1.8 | 1.9 was 1.8 | 1.8 |
| Unemployment rate | 3.8 | 4.1 | 4.1 | 4.1 was 4.0 | 4.1 was 4.0 |
| PCE inflation | 2.8 was 3.3 | 2.4 was 2.5 | 2.1 was 2.2 | 2.0 | 2.0 |
| Core PCE inflation | 3.2 was 3.7 | 2.4 was 2.6 | 2.2 was 2.3 | 2.0 | |
| Federal funds rate | 5.4 was 5.6 | 4.6 was 5.1 | 3.6 was 3.9 | 2.9 | 2.5 |
Median projections of FOMC participants; previous: September.
Each dot is one participant's projection of the federal funds rate (%) at the end of each year and in the longer run.
December September median September 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 maintain the interest rate paid on reserve balances at 5.4 percent, effective
November 2,December 14, 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
November 2,December 14, 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.
Press conference
December 13, 2023, 2:30 p.m. ET · Read the transcript
What Powell said that the statement didn't
- The chair said the FOMC has raised the policy rate by 5¼ percentage points since early last year and reduced securities holdings by more than $1 trillion.
- The chair said the median SEP projection for the federal funds rate is 4.6 percent at the end of 2024, 3.6 percent at the end of 2025, and 2.9 percent at the end of 2026.
- The chair said the median SEP projection for GDP growth is 1.4 percent next year, and the median unemployment rate projection rises to 4.1 percent at the end of next year.
- The chair said total PCE prices rose 2.6 percent over the 12 months ending in November, and core PCE prices rose 3.1 percent.
- The chair said the addition of the word "any" in the statement acknowledges that the policy rate is likely at or near its peak for this tightening cycle, but participants did not want to take further hikes off the table.
Summary generated automatically from the transcript and the statement.