FOMC Update

Gary Pzegeo, CFA

July 26, 2023

A summary of the Federal Reserve's July 2023 meeting

The Federal Reserve (Fed) raised its policy rate to a target range of 5.25% to 5.50%. The Fed briefly paused its rate hiking program in June with a message that it expected to deliver two additional 0.25% increases before the end of 2023. The Fed paused in order to assess the impact of rate hikes on economic and credit conditions.  Recent strength in the economy and relative stability within the banking system appear to have given the Fed enough comfort to resume tightening.

Current Conditions – The Fed’s statement regarding economic conditions was broadly similar to their June release. The economy is expanding at a moderate pace and core inflation remains high despite a better than expected June Consumer Price Index (CPI) release. Powell noted that a stronger economy could lead to higher inflation.

Forward Guidance – Today’s rate increase does not indicate a predetermined round of hikes similar to last year’s  aggressive tightening. Powell stated that the Committee would take a “meeting by meeting” approach to policy and could hike or pause in September depending on the data. Powell added that the Fed has a long way to go on inflation and that they would not be cutting rates this year. 

Policy/Market Reaction – Today’s move was unanimously approved by the Committee. Quantitative tightening will continue at its previous pace. Bond market volatility was uncharacteristically low following the meeting with short-term yields marginally lower. Futures markets currently place a 20%-25% probability on another rate increase at either the September or November Fed meeting.


Gary Pzegeo, CFA  joined the firm in 2007 as head of fixed income, focusing on portfolio management, trading, policy formulation and client service.