“When is the next Fed Meeting?” is a lingering question haunting anxious investors for good reason. The worst phase of inflation in the United States of America peaked over a year ago and yet the Federal Reserve is yet to abandon the interest rate hikes.
The next Federal Open Market Committee(FOMC) will be held on December 12-13, 2023. It is a crucial date that is marked on the calendar of every investor, economist, and policymaker as many investors expect the Fed to hold steady interest rates of 5.25%-5.50%.
This is because October’s Price Index report stated that inflation continues to move lower and interest rates are already at restrictive levels. In this case, the Fed is inclined to wait for interest rates to help bring down inflation to healthy levels. That being said, some Fed officials also believe that even though market forecasts degree, the rates could move higher.
What is the Federal Open Market Committee(FOMC)?
The FOMC is the monetary policy-making arm of the Federal Reserve System whose decisions have significant implications for the U.S. economy. Generally, the FOMC sits eight times in a single year, or more if the situation demands any special considerations.
The FOMC’s decisions have far and wide implications and influence everything from your savings account rates to the cost of borrowing for homes. This is the reason why investors so anxiously wait for the next Fed rate announcement as it affects everyone in the United States in some way or another.
The Last Fed Meeting
The last Fed meeting happened on October 31-November 1, 2023 where interest rates were kept unchanged at a rate of 5.25%-5.50%. This decision was expected as this strategic move allows the Fed to evaluate if the current interest rates are viable to keep inflation at bay without restricting economic growth.
During the 2022-2023 cycle, the Fed has already increased interest rates 11 times to curb inflation but has maintained steady rates at 5.25%-5.50% since July.
While the market expectations for the November meeting were somewhat mixed, many investors suspected that the rates would remain the same. However, some experts also believed that the Fed could move interest rates higher after the pause in June and September meetings.
Moreover, after the September 2023 meeting, Fed Chairman Jerome Powell also hinted that there may be a next Fed rate hike before the end of 2023.
October’s CPI Report
According to October’s CPI report, the United States economy saw a decrease in inflation with a 3.2% annual rate as energy prices fell. However, if we take away food and energy, the inflation rate is close to 4%. Most importantly, shelter costs rose more slowly in the year 2023, which is a good sign given the category’s weight in the series. These shelter costs trend may help in reassuring the Feds.
Still, even though the inflation rate is decreasing slowly, it is still above the Fed’s annual target of 2%, and services inflation still remains high. With that in mind, Fed officials have announced that they have no plans to cut down interest rates in the near term.
What Happens at Fed Meetings?
As mentioned above, the Federal Open Market Committee(FOMC) is the monetary policy-making arm of the Federal Reserve System. There are eight yearly scheduled meetings at the FOMC and more if needed.
The FOMC consists of 12 members- the seven members of the Board of Governors of the Federal Reserve System, the president of the Federal Reserve Bank of New York, and four of the remaining 11 Reserve Bank presidents, who serve one-year terms on a rotating basis
At a typical FOMC meeting, the 12 members review the economic and financial conditions of the country, determine the approach of the monetary policy, and also identify risks to its long-term goals of price stability and economic growth.
After each meeting, the Federal Open Market Committee issues a statement that summarizes its evaluation of the economy and its new policy decisions. The statement also contains an implementation note that details how the policy decisions will be implemented and carried out. The FOMC also publishes its Summary of Economic Projections(SEP) four times a year, displaying the forecasts for key economic variables over the next three years and their views on the path of the federal funds rate.
The FOMC are not open to the public but are recorded and transcribed. The minutes of each meeting are released to the public three weeks after the date of the policy decision. Meanwhile, the transcripts are revealed after five years.
Next Fed Meeting: What Can You Expect?
The FOMC will hold its next meeting on December 12-13, 2023 and many investors believe that the Fed will maintain steady interest rates.
This is because the Fed also faces risk as extremely high interest rates can affect the financial sector, stock market, and trading. These factors could be integral in the decision of the next Fed rate hike. Even if there is an increase in interest rates, experts are only expecting a modest 0.25% increase before the end of 2023.
However, some Fed officials have also hinted at the next Fed rate hike before the end of the year. On November 7, Fed Governor Michelle Bowman said “While I continue to expect that we will need to increase the federal funds rate further to bring inflation down to our 2% target in a timely way, I supported the FOMC’s decision last week to hold the target range for the federal funds rate at the current level as we continue to assess incoming information and its implications for the outlook.”
The Fed has also previously signalled that it expected to raise rates in its prior Summary of Economic Projections, and half of that promise was fulfilled in July. Moreover, Fed Chair Jerome Powell also said that future decisions would be made on a meeting-by-meeting basis, meaning that the next Fed rate hike is expected but not guaranteed.
The market currently assigns around a 17.5% probability to a 0.25% hike, according to interest rate futures.
The Fed’s policy will ultimately depend on what the economic data signals in the coming weeks, including measures of employment, productivity, and most importantly inflation. Moreover, the Fed will also monitor factors like credit conditions, financial markets, and global developments.
Even if the next Fed rate hike occurs, it is unlikely to happen in December but could happen in early 2024 with upcoming decisions on February 1 or March 22. There is also a disagreement between the market and Fed policymakers, as the market expects that the Fed will cut rates instead of raising them in 2024. However, most Fed officials generally disagree with this viewpoint.
Fed Meeting Schedule 2023
The Federal Open Market Committee meets eight times a year. Here is a Fed meeting schedule for 2023-24, and how the Fed decided to increase interest rates.
|Federal Funds Target Rate
|Jan 31, 2024
|Dec 13, 2024
|Nov 1, 2023
|Sept 20, 2023
|July 26, 2023
|Raise +25 bps
|June 14, 2023
|May 3, 2023
|Raise +25 bps
|March 22, 2023
|Raise +25 bps
|Feb 1, 2023
|Raise +25 bps
|Dec 14, 2022
|Raise +25 bps
The next Fed meeting will be held on December 12-13, 2023. The Fed has been holding rates steady for the past 2 meetings at 5.25%-5.50%, which has provided some serious relief for a disoriented banking sector and the stock market. While experts predict that there will be one more rate hike before the end of the year, this will solely depend on the economic conditions in the coming weeks.
For now, the market and Feds disagree on whether another rate increase is in the cards or not. While the Fed believes there is one interest hike left, the market is not convinced. We will have to wait till December to see how the Fed moves on its decision.
Frequently Asked Questions(FAQs)
Q. When was the last time the Fed raised interest rates in 2023?
Ans. The last time the Fed rates interest rates was on July 26, 2023, when the FOMC announced to increase in interest rates by 0.25% bps.
Q. Did the Fed raise interest rates in November 2023?
Ans. No, the November Fed meeting decided to hold the rates steady at 5.25%-5.50%.
Q. Is another Fed price hike possible in 2023?
Ans. It is impossible to predict if the Fed will increase interest rates again or not but the statement of Fed officials hinted at another possible price hike before the end of 2023. Even if the Fed increases prices, it will not be more than 0.25% bps.
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