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US: Fed Chair Press Conference
Highlights
As widely expected, the FOMC left the fed funds target rate range unchanged at 3.75 to 4.00 percent despite the fact that"inflation remains elevated" and the repeated commitment to"deliver price stability".
The vote was 10-2 in favor of maintaining the fed funds target rate range. Lisa Cook and Beth Hammack favored a 25 basis point rate hike.
The press conference brought little clarification.
Chair Kevin Warsh said politics played no role in the decision, less than a week before the November 3 midterm elections.
Warsh stressed"Inflation is too high". but asked why not raise rates now, he said it is not about some fixed individual date on the calendar. In September, the Fed had said that the decision then to hike rates by 25 basis points would"support a timelier return" to target.
Turning to financial conditions, Warsh said that the September rate hike has had an effect, as market particants are discriminating more and credit spreads have widened. What has been done has started to"work some", he said, adding that financial conditions have tightened, although he is"unwilling and unable” to consider them as"tight".
On another topic, Warsh announced a change to the FOMC schedule starting next year. While there will still be eight meetings a year, one will be focused on broad monetary policy strategy with no policy vote. In 2028, two of the eight meetings will be dedicated to setting strategy and six to setting policy.
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.