Jerome Powell speaks on monetary policy after deciding to hold interest rate steady

Federal Reserve Chairman Jerome Powell held a news conference to explain why they have decided to leave the policy rate, federal funds rate, unchanged at the range of 5.25-5.5% at September FOMC meeting and responded to questions. 

Follow our live coverage of the Fed's policy announcements and the market reaction.

Fed meeting press conference key quotes

"Fed has covered a lot of ground, full effects have yet to be felt."

"We can proceed carefully."

"Our decisions will be based on assessments of data and risks."

"Growth in real GDP has come in above expectations."

"Consumer spending remains particularly robust."

"Labor supply and demand continue to come into better balance."

"Inflation has moderated somewhat, expectations appear well-anchored."

"Current stance of policy is restrictive."

"Nominal wage growth has shown some signs of easing."

"Fed projections are not a plan, policy will adjust as appropriate."

"Will continue making decisions meeting by meeting."

"We are in a position to proceed carefully."

"Prepared to raise rates further if appropriate."

"Will keep rates restrictive until confident inflation moving down to 2%."

"The fact that we decided to keep policy rate .where it is doesn't mean we have decided we have, or have not, reached stance of policy we are seeking."

"Majority of policymakers believe it is more likely than not another rate hike will be appropriate."

"We are fairly close to where we need to get, I wouldn't attribute huge importance to one hike."

"Real interest rates are meaningfully positive."

"I would not want to say Summary of Economic Projections (SEP) is a plan."

 

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The section below was published at 18:00 GMT, right after the FOMC released its monetary policy statement and the Summary of Economic Projections.

The US Federal Reserve (Fed) announced on Wednesday that it left the policy rate, federal funds rate, unchanged at the range of 5.25%-5.5% following the September policy meeting. This decision came in line with the market expectation.

In its policy statement, the Fed said that the economic activity continued to expand at a solid pace and noted that job gains have slowed but remain strong. Moreover, the central bank reiterated inflation remains elevated and that they are highly attentive to inflation risks.

The revised Summary of Economic Projections (SEP) - the so-called dot plot - revealed that policymakers forecast one more 25 basis points rate increase before the end of the year.

Key takeaways from the SEP

Fed officials' median view of fed funds rate at end-2025 3.9% (prev 3.4%).

Fed officials' median view of fed funds rate at end-2024 5.1% (prev 4.6%).

Fed officials' median view of fed funds rate at end-2026 2.9%.

Fed officials' median view of fed funds rate in longer run 2.5% (prev 2.5%).

Fed projections imply one more 25-basis-point rate hike this year and 50 bps of rate cuts in 2024, versus 100 bps of 2024 cuts in June projections.

Fed policymakers see much higher GDP growth of 2.1% in 2023, a lower unemployment rate and more progress on core inflation than they saw in June.

Fed interest rate decision market reaction

The US Dollar gathered strength against its rivals with the immediate reaction to the Fed rate decision and the revised dot plot. At the time of press, the US Dollar Index was virtually unchanged on the day at 105.15.

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This section below was published at 13:00 GMT as a preview of the Federal Reserve interest rate decision.

• The Federal Reserve is widely expected to leave its policy rate unchanged at 5.25%-5.5%.
• The Fed will publish the revised Summary of Economic Projections, known as the dot plot. 
• The US Dollar valuation could be impacted by the revised dot plot and FOMC Chairman Powell’s comments.

The Federal Reserve (Fed) is expected to leave its policy rate unchanged at the range of 5.25%-5.5%. The decision will be announced at 18:00 GMT. 

Along with the usual statement, the Fed will also release the revised Summary of Economic Projections (SEP), the so-called dot plot, and FOMC Chairman Jerome Powell will comment on the policy decisions and economic outlook in the post-meeting press conference. 

The market positioning suggests that a no change in the Fed’s policy rate is fully priced in. However, investors still see a nearly 40% probability that the Fed will opt for one more 25 basis points (bps) interest-rate hike before the end of the year, as per the CME Group FedWatch Tool.

Analysts at Wells Fargo expect the dot plot to paint a more optimistic outlook:

“We look for the FOMC to keep its target range for the federal funds rate unchanged at 5.25%-5.50% at its meeting on September 20.”

“We expect that the September SEP will portray a more optimistic outlook for the US economy than the last SEP did in June. Specifically, we look for the FOMC to raise its forecast for real GDP growth this year while also nudging down its outlook for inflation. We do not think the median dots for 2024 and 2025 will change much, if at all, though some of the highest dots may be reined in a bit.”

Federal Reserve interest rate decision: What to know in markets on Wednesday

• The US Dollar Index, which tracks the USD’s performance against a basket of six major currencies, gained nearly 2% in August and it’s up more than 1.5% in September. 
• The benchmark 10-year US Treasury bond yield reached its highest level since 2007 above 4.4% in September before retreating toward 4.3% n the Fed week.
• The Consumer Price Index (CPI) rose 0.6% in August, marking its biggest monthly increase since July 2022. The Core CPI, which strips volatile food and energy prices, increased 0.3% – a slightly stronger pace than the market expectation of 0.2%. 
• The European Central Bank (ECB) unexpectedly raised key rates by 25 bps following the September policy meeting but hinted that it might have reached the end of its tightening cycle.
• Wall Street’s main indexes started the week on a slightly bullish note but failed to gather momentum. The S&P 500 Index closed flat on Tuesday after posting small gains on Monday.
• US Treasury Secretary Janet Yellen said on Tuesday that given the economy was operating at full employment, US growth needed to slow to a rate more in line with its potential growth rate to bring inflation back to target levels.

FOMC speech tracker: Balanced-to-hawkish approach ahead of dot plot

Federal Reserve officials had a relative hawkish bias in their speeches between their July and September meetings. After raising interest rate hikes in July, Fed officials have been delivering messages with a data-dependant approach, but clearly voicing concerns about inflation "still being way too high." Fed Chair Jerome Powell only spoke once in this period at the yearly Jackson Hole Symposium, being very clear in this somewhat hawkish approach. It will be interesting how this messaging translates into the FOMC board members projections of interest rates, also known as the "dot plot," to be published this time around, and which could deliver big market swings.

Date	Speaker	Result	Quote
Aug 1	Goolsbee*	Balanced	I want more proof of inflation easing to end rate hikes
Aug 1	Bostic	Balanced	There is risk of overtightening
Aug 4	Bostic	Balanced	Fed likely to remain in restrictive territory well into 2024
Aug 4	Goolsbee*	Balanced	We should start thinking about how long to hold rates
Aug 7	Bowman*	Hawkish	Additional rate hikes will likely be needed to lower inflation to target
Aug 8	Harker*	Balanced	We may be at the point where we can be patient and hold rates steady
Aug 10	Daly	Hawkish	US July CPI is a “good data point”
Aug 15	Kashkari*	Hawkish	Inflation is still too high
Aug 22	Barkin	Hawkish	Won't prejudge outcome of Fed's September 19-20 policy meeting
Aug 24	Harker*	Balanced	Fed has probably done enough with policy
Aug 25	Powell*	Hawkish	Jerome Powell repeats at Jackson Hole they are prepared to raise rates further
Aug 25	Mester	Hawkish	Undertightening would be worse than overtightening
Aug 25	Harker*	Balanced	Could call for more rate hikes if inflation retreat stalled
Aug 31	Bostic	Balanced	US policy is restrictive enough to bring inflation to 2% over a reasonable time frame
Sep 1	Mester	Balanced	Main debate is how restrictive policy needs to become and for how long
Sep 5	Mester	Balanced	Not expecting we will cut interest rates early next year
Sep 5	Waller*	Balanced	Need more data to say Fed is done raising rates
Sep 7	Williams*	Dovish	Didn’t rule out the possibility of cutting rates in early 2024

*Voting members in 2023.

FOMC speech counter

	TOTAL	Voting members	Non-voting members
Hawkish	6	3	3
Balanced	11	6	5
Dovish	1	1	0

This content has been partially generated by an AI model trained on a diverse range of data.

When will the Fed announce policy decisions and how could they affect EUR/USD?

The Federal Reserve is scheduled to announce its interest rate decision and publish the revised Summary of Economic Projections (SEP), the so-called dot plot, at 18:00 GMT. This will be followed by the post-meeting FOMC press conference at 18:30 GMT. Investors expect the Fed to leave the policy rate unchanged but see a strong probability for one more rate hike in any of the two remaining Fed meetings this year. 

Following the July policy meeting, the Fed decided to raise the policy rate by 25 bps. In the post-meeting press conference, Chairman Jerome Powell delivered some cautious comments on the policy outlook and revived expectations that the Fed might leave interest rates steady for the rest of the year. "We haven't made any decisions about any future meetings,” Powell told reporters and added that they believe the monetary policy is restrictive. "If we see inflation coming down credibly, we can move down to a neutral level and then below neutral at some point,” he noted.

However, Since the July meeting, US macroeconomic data have highlighted the resilience of the economy and tight conditions in the labor market, causing investors to reassess the Fed’s rate outlook. In August, Nonfarm Payrolls rose by 187,000, beating the market estimate of 170,000, and the annual wage inflation held at 4.3%. Moreover, the PMI surveys showed that economic activity in the service sector continued to expand at a healthy pace in the summer months.

Meanwhile, Powell reiterated at the annual Jackson Hole Economic Symposium that they are prepared to raise rates further, citing “substantial further ground to cover” to get back to price stability.

The SEP showed in June that the terminal rate projection for end-2023 stood at 5.6%, up from 5.1% in March. Similarly, the rate forecast for the end of 2024 rose to 4.6% from 4.3%. In case there is another upward revision to the terminal rate projection, or the end-2024 rate forecast, the US Dollar (USD) could continue to outperform its rivals. In this scenario, combined with the ECB’s dovish guidance, EUR/USD could extend its downtrend.

On the other hand, the USD could lose interest if the dot plot shows no significant revisions to interest rate projections. Markets could turn optimistic about a return to looser monetary policy next year, triggering a risk rally and putting pressure on the USD with the initial reaction. Nevertheless, it is difficult to say whether a steady uptrend could be fuelled in the pair given the worsening outlook for the European economy.

Previewing the Fed event, “The main downside risk for the USD would be if the median projection for one last hike this year is removed, and Chair Powell signals that the rate hike cycle has reached an end. But any correction should again prove short-lived,” economists at MUFG Bank said.

“We still believe that upward momentum continues to favour further USD upside in the near-term while the US economy is outperforming,” they added.

Eren Sengezer, European Session Lead Analyst at FXStreet, shares his technical outlook for EUR/USD: “EUR/USD stays below a one-month old descending trend line on the daily chart and the Relative Strength Index (RSI) indicator stays well below 50, highlighting the bearish bias in the near term. Additionally, the 20-day Simple Moving Average (SMA) completed a bearish cross with the 200-day SMA, confirming the buildup of selling pressure.”

Eren also points out the key levels for the pair: “The Fibonacci 38.2% retracement level of the September 2022 - July 2023 uptrend forms key support level at 1.0600. A daily close below this level could attract more sellers. In this scenario, EUR/USD could face interim support at 1.0540 (static level from February) on its way to test 1.0500 (static level, psychological level). On the upside, 1.0800-1.0815 (descending trend line, 200-day SMA) aligns as first resistance. Once the pair stabilizes above this level, buyers could target 1.0860 (Fibonacci 23.6% retracement) and 1.0900 (100-day SMA).