Live Data Coverage: September Federal Reserve Meeting, Rate Decision

September FOMC Preview:

• The Federal Reserve will release a new Summary of Economic Projections (SEP) as well as the first ‘dots’ in the dot plot for 2024.
• Policymakers most likely won’t announce a taper, but will give their strongest hint that the taper announcement will come as soon as November.
• We’ll discuss how markets may react to the September Federal Reserve rate decision starting at 13:45 EDT/17:45 GMT. You can join live by watching the stream at the top of this note.

Taper Talk at a Boil

In context of recent economic data, it seems that more “progress” may have been made towards the Fed’s goal of seeing jobs growth return to its pre-pandemic days: August US retail sales proved better than expected; and weekly jobless claims data have not suggested significant volatility in the labor market as unemployment insurance benefits have ended.

However, with headline US NFP growth slowing in August and a potential US debt ceiling breach looming next month, a taper announcement seems unlikely to arrive today. Instead, it is widely anticipated that the September Fed meeting will yield a strong hint that the taper will begin before the end of the year.

Federal Reserve Interest Rate Expectations (September 22, 2021) (Table 1)

Rate hike expectations have been rather consistent for two months. Ahead of the July FOMC meeting, markets were pricing in a 68% chance that December 2022 would be the first month that produced a 25-bps rate hike. Now, just ahead of the September Fed meeting, Fed funds futures are pricing in a 75% chance of the first hike arriving in December 2022. Not a significant change, but one that speaks to a more hawkish outlook by market participants.

Taper Timeline

After suggesting that the inflation mandate “was met” at the August Jackson Hole Economic Policy Symposium, Fed Chair Jerome Powell is likely to give his strongest indication yet that a taper announcement will be made soon – just not today. Accordingly, the taper timeline that we’ve outlined for several months now appears intact ahead of the September Fed meeting:

• June through September 2021 = taper talk
• August/September 2021 = indication taper is coming
• November/December 2021 = taper targets announced
• December 2021/January 2022 = taper begins
• September/December 2022 = taper ends
• January 2023/March 2023 = first rate hike (3-6 months post-end of taper)

We’ll discuss how markets may react to the September Federal Reserve rate decision starting at 13:45 EDT/17:45 GMT. You can join live by watching the stream at the top of this note.

Read more: Central Bank Watch: Fed Speeches, Interest Rate Expectations Update; September Fed Meeting Preview

--- Written by Christopher Vecchio, CFA, Senior Strategist