The FOMC left rates unchanged after the meeting of September 19-20 with the fed funds target rate range at 5.25 percent-5.50 percent. This is as expected.

The FOMC statement sees only tweaks from the one issued on July 26. The description of economic conditions was described as"solid" in the most recent version from"moderate" in the previous one. Job gains are downgraded slightly as"slowed" in the intermeeting period but remaining"strong".

The quarter update to the summary of economic projection (SEP) includes a big upward revision of 1.1 tenths in the median forecast for real GDP growth to 2.1 percent in 2023, and a smaller increase of 0.4 to up 1.5 percent in 2024. GDP is forecast to increase 1.8 percent in 2025 and 2026. The median forecast for the unemployment rate is revised down 0.3 to 3.8 percent for 2023, revised down 0.4 to 4.1 percent in 2024 and down 0.4 percent to 4.1 percent in 2025. In 2026, the unemployment rate is expected to be 4.0 percent.

The PCE deflator is revised up a scant 0.1 tenth to 3.3 percent for 2023, unrevised at 2.5 percent in 2024, and revised up to 2.2 percent in 2025. In 2026, the PCE deflators is expected to reach the 2 percent inflation target. The core PCE deflator forecast is revised down 2 tenths to 3.7 percent for 2023, is unrevised at 2.6 percent in 2024, and revised up a tenth to 2.3 percent in 2025 while falling to the 2 percent target in 2026.

The forecast for the midpoint of the fed funds target rate range is unrevised at 5.6 percent for 2023, leaving in place anticipation for one more 25 basis point increase before the end of the year. By the end of 2024, the fed funds target is expected to decline to 5.1 percent, consistent with two rate cuts of 25 basis points each, or one of 50 basis points. By the end of 2025, the fed funds target midpoint is expected to fall to 3.9 percent from 2024, or about five 25 basis point cuts. In 2026, the fed funds rate is expected to fall to 2.9 percent, or about four 25 basis point cuts from the end of 2025. With the fed funds rate forecast to decline starting in 2024, the question becomes when the FOMC will offer a signal on the timing and/or size of changes to a less restrictive stance of monetary policy.

After resuming rate increases in July by 25 basis points, the Fed is expected to hold rates unchanged at their September meeting. Econoday's sample is unanimous in this forecast.

The FOMC meeting announcement is a policy statement issued at the conclusion of each meeting of the Federal Open Market Committee. It offers updates on economic conditions with special focus on the health of the labor market and the latest on inflation. It also updates the status of the federal funds target which is the FOMC's official policy interest rate. This rate is expressed within a range, such as 1.75 to 2.00 percent. The center of this range is the implied target. The higher this target, the more restrictive monetary policy becomes, the lower this target, the more accommodative policy becomes. Other policy tools are also discussed in the meeting announcement including updates on direct purchases of Treasuries and mortgage-backed securities. Debate is not offered in the statement, just the consensus view is expressed, though the statement does list the total committee vote and how each member voted.

The Fed determines interest rate policy at FOMC meetings. These occur roughly every six weeks and are the single most influential event for the markets. For weeks in advance, market participants speculate about the possibility of an interest rate change at these meetings. If the outcome is different from expectations, the impact on the markets can be dramatic and far-reaching.

The interest rate set by the Fed, the federal funds rate, serves as a benchmark for all other rates. A change in the fed funds rate, the lending rate banks charge each other for the use of overnight funds, translates directly through to all other interest rates from Treasury bonds to mortgage loans. It also changes the dynamics of competition for investor dollars. When bonds yield 5 percent, they will attract more money away from stocks than when they only yield 3 percent.

The level of interest rates affects the economy. Higher interest rates tend to slow economic activity; lower interest rates stimulate economic activity. Either way, interest rates influence the sales environment. In the consumer sector, fewer homes or cars will be purchased when interest rates rise. Furthermore, interest rate costs are a significant factor for many businesses, particularly for companies with high debt loads or who have to finance high inventory levels. This interest cost has a direct impact on corporate profits. The bottom line is that higher interest rates are bearish for the stock market, while lower interest rates are bullish.

The Fed also began quantitative easing during the past recession and, through direct purchases in the market, steadily increased its holdings of Treasuries and mortgage-back securities before pulling back from the program beginning in late 2017. Along with lowering its bond holdings, the Fed began to gradually raise its federal funds target until mid-2019 when, facing slowing global growth, it began to lower its target.

Frequency
Eight times a year.