Fed-Watching: Latest FOMC Statement Under the Magnifying Glass

On September 18, 2024, the Federal Reserve cut the target range for the federal funds rate by 50 basis points (bps), a significant reduction that exceeded general expectations of a 25bp cut. This larger-than-expected cut reflects the Fed’s pessimistic view of the employment market. Changes in the related FOMC statement from its previous release on July 31, 2024, further underscore this pessimism, as the Fed is meticulous in its public communications, where every word matters. Key textual changes include:

• Job gains have “slowed” (previously “moderated”).

  
  

• The Fed “has gained greater confidence that inflation is moving sustainably toward 2 percent” (new text).

  
  

• The Fed judges that the risks to achieving its employment and inflation goals “are roughly in balance” (previously “continue to move into better balance”).

  
  

• The Fed is strongly committed to “supporting maximum employment and returning inflation to its 2 percent objective” (previously omitted the words “supporting maximum employment”).

It is also noteworthy that Michelle Bowman voted for a 25bp cut, indicating that at least one FOMC member is less pessimistic about the employment market or believes that inflation risks justify a smaller cut.

The attached PDF is a marked version of the September 18, 2024 FOMC statement, showing all changes from the July 31, 2024 statement.

2024.9.18 Marked FOMC Statement.pdf

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