Here’s The Schedule For The Fed’s Upcoming Meetings And What To Expect

For the first half of 2023 the Fed’s remaining decision will come on on March 22, May 3 and June 14 with the interest rate announcement coming at 2pm ET and a press conference at 2.30pm ET. The March and June meetings will be relatively more informative as the Fed will provide updated economic projections. The Fed only schedules eight meetings a year, and so does not meet in April. The market currently expect rates to increase 0.25-percentage-points at each of these upcoming three meetings, and the Fed may then hold rates steady for the second half of the year.

An Inflation Plateau

The main issue coloring the Fed’s upcoming decisions is that inflation may not be falling as fast as hoped. As Governor Christopher Waller said on March 2, “Although inflation has been coming down since the middle of last year, the recent data indicate that we haven’t made as much progress as we thought.” Part of the reason is the strong jobs market pushing up wages and services costs. Inflation did decline in the second half of 2022, but January’s data suggests that the rate of decline could be slowing. Data for February will inform whether January’s economic news was more of a blip or the start of an unwelcome trend for inflation. The upcoming CPI inflation report for February on March 14 will be informative here.

If inflation is moving sideways, then the Fed has two options. The first is to wait longer for their restrictive policy to have an impact. The second is to raise rates further in the hope of bringing prices down faster.

Currently the Fed is leaning toward the second option with further rate hikes likely for the March, May and June meetings. However, these rate increases are more likely to be fine-tuning with 0.25-percentage point increases, rather than the aggressive 0.75-percentage-point moves in rates that we saw frequently in 2022. That said, fixed income markets see a one in three chance that the Fed makes a 0.5-percentage-point move in March. That may happen if February’s inflation data comes in hotter than anticipated.

Success, Recession Or Both

Then aside from policy moves, the next big question for the Fed and markets is what success in taming inflation looks like. There was some optimism that high rates coupled with improved supply chains and a better supply and demand balance would ease inflation. That’s happened to some extent, but the Fed is now aware, as mentioned in the minutes of the February meeting, that below trend growth may be needed to bring prices under control. That could mean a recession in 2023. The Fed is most concerned about inflation, but if we see a recession then the Fed may be tempted to cut rates to support the broader economy. That said, despite many indicators that a recession could be coming, the jobs market remains robust, suggesting a recession is not here yet.

What To Look For

The economic projections with the Fed’s March decision will provide an update on where the Fed sees rates heading in 2023. It’s likely rates will peak somewhere in the 5% to 6% range, but projections may help clarify exactly where.

Then markets currently expect the Fed to stop raising rates by July, however, that expectation has moved back over recent months, and if economic data continues to signal hot inflation then the Fed could continue to raise rates over the summer. Lastly, the economy has defied expectations for some time now, growing faster than expected with strong job growth despite rising rates. If that picture changes, then the Fed may become a little more cautious on raising rates as the downside risks for the economy increase.

Expect the Fed to continue to raise rates at its upcoming meetings, especially if inflation data doesn’t cool, but the real question is what the Fed has planned for the summer, and if the U.S. can ultimately avoid a recession despite elevated rates.