U.S. Federal Open Market Committee (FOMC) Meeting Minutes – September 2022

Originally Published: October 12, 2022, 2 PM ET
Updated: October 12, 2022 2:23 PM ET

The U.S. Federal Open Market Committee September meeting minutes are out. Whether you’re trading penny stocks or higher-priced company shares, the details in the September Fed meeting minutes matter from a big-picture perspective.

If you’ve paid attention to weekly economic events, you likely know what happened last month at the September Fed Meeting. You also probably know what Federal Reserve Chairman Jerome Powell discussed in the Fed announcement and press conference. But if you’re coming into this fresh, let’s briefly recap the September Fed Meeting.

September Fed Meeting Recap

In response to strong economic reports and higher-than-anticipated inflation data from August CPI and PPI results, the Federal Reserve took a more hawkish stance. Here are some of the top takeaways from that September FOMC meeting:

  1. Fed rate hike announcement: the Federal Reserve Raises Rates By 75 basis points
  2. FOMC votes 12-0 for fed funds rate action.
  3. Fed raises Fed Funds Rate target for the end of year to 4.4%, 4.6% at the end of 2023, 3.9% in 2024
  4. Fed Funds rate for 2023 set at 4.6
  5. Increased unemployment rate to 4.4% in 2023, with slightly higher expectations of 3.8% by the end of this year.
  6. Remain on track for balance sheet reduction
  7. Fed officials see inflation of 5.4% by the end of 2022, 2.8% at the end of 2023, and 2.3% for 2024
  8. Fed officials see 0.2% GDP growth at the end of this year, 1.2% for 2023, & 1.7% for 2024
  9. Fed says 1.25 percentage point of rate increases remain for the rest of this year and 0.25 percentage point rate hike in 2023.
  10. Interest rates rise to highest level since 2008.

Now the market looks for specific verbiage and discussions within the actual September Fed meeting minutes from September to see if there are any additional details not already priced into the stock market today.

Fed meeting minutes FOMC meeting

What Are The Minutes Of The Federal Open Market Committee?

According to the FOMC, they “provide a timely summary of the discussion during the meeting and the decisions taken at the meeting. The minutes describe the views expressed by policymakers and explain the reasons for the Committee’s decisions. The minutes can help the public interpret economic and financial developments and understand the Committee’s decisions. As an official record of the meeting, the minutes identify all attendees, and provide a complete record of policy actions taken, including the votes by individual members on each policy action.”

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When Are The Fed Minutes Released?

FOMC Meeting Minutes are released three weeks after each meeting.

FOMC Meeting Minutes for September 2022

Statements from the FOMC Meeting Minutes:

“The information available at the time of the September 20–21 meeting suggested that U.S. real GDP was increasing at a modest pace in the third quarter after having declined over the first half of the year. Labor demand remained strong, and the labor market continued to be very tight. Recent monthly readings indicated that consumer price inflation—as measured by the 12-month percentage change in the price index for personal consumption expenditures (PCE)—remained elevated.”

On Fed Funds Rate

“The expected path of the federal funds rate—implied by a straight read of financial market quotes—rose in the period since the July FOMC meeting, largely reflecting more-restrictive-than-expected monetary policy communications amid stronger-than-expected economic data and ongoing concerns about high inflation.”

Bonds

“Corporate bond spreads narrowed slightly, on net, and remained roughly at the midpoints of their historical distributions. Reflecting increases in both policy rates and corporate bond spreads, yields on corporate bonds rose significantly since the start of the year. Municipal bond spreads over comparable-maturity Treasury yields widened a touch.”

GDP Projections

“Participants revised down their projections of real GDP growth for this year from their projections in June. Several participants noted that the continued strength in the labor market and the data on gross domestic income raised the possibility that the current GDP data could understate the strength in economic activity this year.”

Economic Outlook

“Participants saw supply bottlenecks as likely continuing for a while longer, and a couple commented that constraints on production were increasingly taking the form of labor shortages rather than parts shortages.”

“Some participants noted a number of developments consistent with the labor market moving toward better balance, including a lower rate of job turnover, a moderation in employment growth, and an increase in the labor force participation rate for prime-age workers. However, several participants assessed that the scope for further improvement in labor force participation was likely limited, especially in view of the sizable contribution that retirements had made to the previous decline in the participation rate.”

“Some stressed that a more prolonged period of elevated inflation would increase the risk of inflation expectations becoming unanchored, making it much more costly to bring inflation down.”

“Participants agreed that the uncertainty associated with their economic outlooks was high and that risks to their inflation outlook were weighted to the upside.”

“A number of participants commented that a wage-price spiral had not yet developed but cited its possible emergence as a risk.”

Participants noted “that inflation had not yet responded appreciably to policy tightening and that
a significant reduction in inflation would likely lag that of aggregate demand.

“Participants observed that a period of real GDP growth below its trend rate, very likely accompanied by some softening in labor market conditions, was required. They agreed that, by moving its policy purposefully toward an appropriately restrictive stance, the Committee would help ensure that elevated inflation did not become entrenched and that inflation expectations did not become unanchored.”

FOMC Policy Action Plan

ECONOMIC DATA FEDERAL RESERVE STOCK MARKET THIS WEEK

The action plan moving forward, as outlined in the FOMC Meeting Minutes include the following:

  • Undertake open market operations as necessary to maintain the federal funds rate in a target range of 3 to 3¼ percent.
  • Conduct overnight repurchase agreement operations with a minimum bid rate of 3.25% and with an aggregate operation limit of $500 billion.
  • Conduct overnight reverse repurchase agreement operations at an offering rate of 3.05% and with a per-counterparty limit of $160 billion per day.
  • Reinvest into agency mortgage-backed securities (MBS) the amount of principal payments from the Federal Reserve’s holdings of agency debt and agency MBS received in each calendar month that exceeds a cap of $35 billion per month.
  • Allow modest deviations from stated amounts for reinvestments, if needed for operational reasons.

All voting members were in favor of these actions.

Stock Market Reaction After September FOMC Meeting Minutes

Following the publication of the Fed Meeting Minutes from September, major indexes and industry ETFs attempted a rebound. The SPDR Financial ETF (NYSE: XLF) popped modestly higher back above $30.55, the SPDR Dow Jones ETF (NYSE: DIA) managed to reclaim $293.50, and the Russell 2000 Small Cap ETF (NYSEARCA: IWM) approached levels near its high of the day set at $168.05. Other significant exchange-traded funds like the SPDR Technology ETF (NYSE: XLK) briefly popped but essentially treaded water trading sideways after the Fed minutes were released.

Overall, the reaction to the latest round of FOMC minutes was not as aggressive as some had expected. That’s likely due to today’s September PPI inflation data that came out higher than anticipated and in light of more CPI inflation data coming out before the opening bell on Thursday.

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