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US: Fed Chair Press Conference
Highlights
There was generally a hawkish bias in Fed Chair Kevin Warsh's wording today. He said during a short 30-minute press conference that"too many" categories are still posting price increases above 3.0%, offering a bit more insight into the reaction function: it depends on the breadth of inflation.
The FOMC raised the fed funds target rate range by 25 basis points to 3.75 to 4.00 percent in an unanimous decision (12-0)."Today’s policy action will support a timelier return to the Committee’s 2 percent goal," the statement said, repeating that"inflation remains elevated". Warsh said that today's unanimous decision shows the FOMC is"serious" about price stability but did not specify what"timelier" meant. The Fed's economic projections show that both headline and core PCE inflation are not returning to the 2.0 percent target until 2029.
The Fed Chair said hiking rates today amounted to removing"a dose of accommodation", adding that he finds it"difficult to describe financial conditions as restrictive". He also said that the decision was not a market-led.
Instead, Warsh highlighted three factors that have changed since July, starting with the strengthening of the economy, which allows the Fed to focus on price stability without harming employment.
Since July, he added, inflation readings have failed to demonstrate that underlying inflation trends were meaningfully improving toward the 2% target, offering no new evidence to reverse that judgment.
Evolving geopolitics are the third key change since the last meeting, with Warsh highlighting heightened tensions across global"hot spots".
Definition
The Fed announced in 2011 that then Fed Chair Ben Bernanke would hold press briefings four times a year to explain the FOMC's latest quarterly economic projections. The purpose of the briefings is to provide additional context for the FOMC's policy decisions and to allow for questions-and-answers with the press. According to the Fed, the"introduction of regular press briefings is intended to further enhance the clarity and timeliness of the Federal Reserve's monetary policy communication." The press briefing is held at 2:30 p.m. ET on the days of FOMC statements in which quarterly projections are released. Beginning in 2019, the briefing will be held after each FOMC meeting. The policy statement is released at 2:00 p.m. ET after the conclusion of every FOMC meeting regardless of whether there are forecasts or not.
Description
The Fed’s meeting statement and economic projections can move financial markets. However, the Fed’s meeting statement — which indicates any changes in monetary policy—typically is very concise and lacking in detail. However, the Fed now releases its economic forecasts four times a year. As of March 20, 2013, the forecasts are released at the same time as the FOMC statement during the months of March, June, September, and December. After each of the 8 Fed meetings, the chair holds a press conference to explain the forecasts and other policy issues. The chair’s press conference allows for the financial markets and public in general to learn more about why and how the monetary policy decision was made and to learn more about FOMC views on the direction of the economy—including real growth, inflation, unemployment, expected timing of changes in the fed funds rate, and expected levels of the fed funds rate in the near term.