The next Federal Open Market Committee (FOMC) meeting will be held on September 19-20, 2023. The FOMC is the monetary policy-making body of the Federal Reserve System, and it holds eight regularly scheduled meetings during the year, as well as others when necessary.
Key Takeaways
- The Federal Open Market Committee (FOMC) raised interest rates to 5.25%–5.50% at the July 2023 meeting, marking 11 rate hikes this cycle aimed at curbing high inflation.
- Despite the pause in June, most analysts predicted the quarter-point rate hike at the July meeting, given the Fed’s commitment to maximum employment and price stability.
- The consensus among market experts suggests that the Fed may introduce one more 25-basis-point rate hikes this year to moderate inflation to the Fed’s 2% target.
- Some Fed watchers remain concerned about more interest rate increases due to risks of bank failures, stock market instability, and global economic uncertainty.
During the latest FOMC meeting in July, interest rates rose by 25 basis points to 5.25-5.50%—the 11th such hike in this cycle (after a brief pause in June) intended to slow down high inflation.
Market expectations for the September meeting are mixed. Some analysts believe that the Fed will continue hiking its benchmark borrowing rate increases after a “hawkish pause” in June, saying that even though inflation has moderated, it remains a concern.
Others think that the Fed may put things on hold and see the state of the economy, given the risks of bank failures, a tepid stock market, and global economic instability. Overall, the consensus is that the Fed will impose one additional 25-basis-point rate hike before the end of the year, however, Fed Chair Jerome Powell said that no decisions about the future have been made, and the Fed will take it “meeting by meeting.”
What Happens at Fed Meetings?
The Federal Open Market Committee (FOMC) is the monetary policy-making body of the Federal Reserve System, the central bank of the United States. The FOMC holds eight regularly scheduled meetings during the year and may hold other meetings as needed to set emergency short-term interest rates or implement other policy tools.
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 each FOMC meeting, the members review economic and financial conditions, determine the appropriate stance of monetary policy, and assess the risks to its long-term goals of price stability and sustainable economic growth.
The FOMC issues a statement after each meeting that summarizes its assessment of the economy and its policy decision. The statement also includes an implementation note that provides operational details on how the policy decision will be carried out. The FOMC also publishes its Summary of Economic Projections (SEP) four times a year, showing the members’ forecasts for key economic variables over the next three years and their views on the appropriate path of the federal funds rate.
The FOMC meetings are closed to the public but are recorded and transcribed. The minutes of each meeting are released three weeks after the date of the policy decision. The transcripts are released with a five-year lag.
Note
The FOMC chair typically holds a press conference after four of the eight meetings each year, where the chair explains the policy decision and answers questions from journalists.
Most Recent Fed Meeting (July 2023)
During the last FOMC meeting, on July 25-26, 2023, the Fed raised its target interest by 25 basis points to 5.25%-5.50%, resuming an aggressive rate-hiking campaign that began in March 2022 to fight rising inflation, but saw some reprieve during the June meeting. The Fed also signaled that it could continue to raise rates at least one more time this year, since most officials view this as necessary to bring inflation down to the 2% target over time. However, Fed Chair Powell has stated that the decision made during the September meeting will depend on the data that comes in.
The market widely expected the Fed’s decision to raise rates in July, as was the decision to hold rates steady in June (what some analysts called a “super hawkish” pause), as the Fed left the door open to resuming rate hikes again before 2023 comes to a close. The Fed has raised rates almost a dozen times since early 2022 in an attempt to cool the U.S. economy and battle inflation that peaked at more than 9% last year. The Fed’s rate-hiking campaign has been the most aggressive since the 1980s, and it has sparked some turmoil in the banking sector, the stock market, and the global economy-however, rates at 5.50% are still less than half of their 1980s peak.
The Fed acknowledged the looming risks of banking instability, stock market volatility, and a global slowdown, but it argued that the economic outlook remains favorable and that the labor market is resilient. The Fed revised its economic projections, expecting faster growth, lower unemployment, and higher inflation this year, but also seeing a rise in unemployment and a decline in inflation next year.
The Fed reaffirmed its commitment to achieving its dual mandate of maximum employment and price stability and said that it will act as appropriate to sustain the expansion. The Fed’s policy moves depend on what economic indicators indicate for the coming weeks and months, including the Consumer Price Index (CPI), payrolls, and gross domestic product (GDP) growth.
The Fed’s decisions and statements have important implications for investors, as they affect the cost of borrowing, the value of assets, and the strength of the U.S. dollar. Investors and analysts pay close attention to the Fed’s signals and actions, as those can have a significant impact on their portfolios, strategies, and recommendations.
Next Fed Meeting: What to Expect in September
The Federal Reserve will hold its next policy meeting on September 19-20, and many analysts and investors expect the central bank to maintain its rate-hiking campaign. However, the Fed also faces risks, as higher interest rates can negatively affect the banking sector, stock market, and trade. These factors could weigh on its next rate decision, so experts are only expecting a modest 25-basis-point (bps)—or 0.25%—increase before the year is out. This, of course, will depend on the trajectory of inflation and the state of the economy.
The Fed had previously signaled that it expected to raise rates two more times this year in its latest Summary of Economic Projections, and half of that promise was kept in July. Fed Chair Jerome Powell also said that future decisions would be made on a meeting-by-meeting basis, meaning that a rate hike is on the table but not a guarantee. The market currently assigns a 35% probability to a quarter-point hike before December, according to interest rate futures (as of July 26).
The Fed’s policy moves ultimately will depend on what economic data show in the coming weeks, including measures of inflation, employment, and productivity. The Fed also will monitor credit conditions, the financial markets, and global developments closely.
The Fed’s goal is to achieve a soft landing for the U.S. economy while balancing its dual mandate of maximum employment and price stability. The Fed’s decision and statement will have important implications for investors, as they affect the cost of borrowing, the value of markets and assets, and the direction of the U.S. dollar.
Fed Meeting Calendar
The FOMC meets regularly eight times a year. The table below shows the calendar from December 2022 to December 2023, and how the Fed decided on interest rate hikes.
| FOMC Meeting Calendar 2023 | ||
|---|---|---|
| Date | Fed’s Decision | Federal Funds Target Rate |
| Dec. 13, 2023 | TBD | TBD |
| Nov. 1, 2023 | TBD | TBD |
| Sept. 20, 2023 | TBD | TBD |
| July 26, 2023 | Raise +25 bps | 5.25%-5.50% |
| June 14, 2023 | Held steady | 5.00%–5.25% |
| May 3, 2023 | Raise +25 bps | 5.00%–5.25% |
| March 22, 2023 | Raise +25 bps | 4.75%–5.00% |
| Feb. 1, 2023 | Raise +25 bps | 4.50%–4.75% |
| Dec. 14, 2022 | Raise +25 bps | 4.25%–4.50% |
Did the Fed Raise Interest Rates in July 2023?
Yes, the Fed raised its interest rate target by 25 bps in the July meeting to 5.25%-5.50%. This, after taking a brief pause when it held rates steady in June 2023, at 5.00%–5.25%.
How Many Rate Hikes Have There Been in 2023?
There have been four rate increases so far in 2023, occurring at the February, March, May, and July FOMC meetings.
Will the Fed Raise Rates Again This Year?
It is impossible to exactly predict what the Federal Reserve will decide at its next meeting, but the wording of the Fed’s announcement indicated at least one more small rate hike between now and the end of the year. At the time of this writing, futures markets assign about a one-third probability that we will see a 25-bps-rate hike from the July meeting, and expect another 25-bps increase later in the year.
The Bottom Line
The next FOMC meeting will be held on September 19-20, 2023. The Fed hiked interest rates by 25 bps to 5.25%-5.50% at its July 2023 FOMC meeting, continuing an aggressive campaign of nearly one dozen rate hikes, intended to damp rising inflation. Following a “hawkish pause” in June, which provided some relief for a strained banking sector and tepid stock market, experts predict that this rate hike may be followed by one more before the end of the year—although this will depend on economic conditions in the coming months.
