The fifth FOMC meeting of the year ended this afternoon with no surprises. The FOMC policy statement had no policy changes. In fact, the statement changed very little from the June statement. The Fed continues to say that "the current 0 to 1/4 percent target range for the federal funds rate remains appropriate."
The Fed remains fairly quiet regarding clues to when its first rate hike will occur. The only clue is a slightly more upbeat view of the economy in the first paragraph of the statement. As economist Tim Duy said in his FOMC recap:
In my opinion, this represents a not trivial upgrade of their thoughts on the labor market. Job growth is "solid," unemployment continues to decline, and a much more forceful conclusion on underemployment. No longer has underutilization diminished by a wishy-washy "somewhat." It now conclusively "has" diminished. Hence, it seems like the Fed is closer to declaring victory over one impediment to hiking rates - Fed Chair Janet Yellen's concerns about the high degree of underemployment.
The Fed continues to insist that the rate hike decision will be data dependent. If the labor market continues to improve, a rate hike in September is possible as Duy concludes in his FOMC recap:
All else equal, the next two labor reports will factor strongly into the Fed's decision in September. A continuation of recent labor trends is likely sufficient to induce them to pull the trigger. Further signs of stronger wage growth would make a September move a certainty.
I’m not quite that optimistic. I’ve seen the Fed delay tightening for far too long. I still think we’ll see the hawks on the Fed vote for a rate hike before the majority on the Fed vote for it. Today, all voting members on the FOMC voted for the status quo. Not even the inflation hawk, Jeffrey Lacker, dissented. I think we’ll see Lacker be the lone vote for a rate hike before the majority on the FOMC vote for it. You can see who are considered hawks and doves on the Fed with this Reuters Hawk-Dove scale.
Future FOMC Meetings
The next three FOMC meetings are scheduled for September 16-17, October 27-28 and December 15-16 The September and December meetings will include the summary of economic projections and a press conference by Fed Chair Yellen. The first rate hike is most likely to take place at a meeting with a press conference.