Phillip Macro Update – Key points for Sep FOMC Meeting September 21, 2023 267


The U.S. Federal Open Market Committee (FOMC) concluded its two-day meeting on the 20th of Sep 2023. The meeting discussed the Fed’s monetary policy stance and economic projection.



Key pointers to note in this meeting


1.      A halt on interest rate hikesIn this FOMC meeting, the U.S. Federal Reserve (Fed) committee stated that they do see the current stance of monetary policy as restrictive which puts downward pressure on economic activity, hiring, and inflation. Additionally, households and businesses are facing headwinds from tighter credit conditions in the economy. Therefore, the members have voted unanimously to maintain the benchmark federal funds rate at the range of 5.25-5.50%, and this decision to leave its policy interest rate unchanged was in line with market expectations.


2.      Gradual moderation observed but inflation still persists – Data points such as the Consumer Price Index (CPI) and Personal Consumption Expenditure (PCE) have continued to portray signs of slowing down within the economy with the latest August headline CPI coming in at 3.7% YoY and Core CPI at 4.3% YoY. This has crept up slightly as compared to July’s headline CPI of 3.2% YoY as the index for gasoline was the largest contributor to the monthly all-items increase for the month of August. Likewise, Total PCE in July came in at 3.3% YoY and 4.2% YoY for Core PCE, respectively, but during this meeting, it was mentioned that the Total and Core PCE for August are estimated to rise by 3.4% YoY and 3.9% YoY, respectively. The median projection in the SEP for total PCE inflation was revised to 3.3% this year, falls to 2.5% next year, and reaches 2% in 2026. Despite Inflation having moderated somewhat since the middle of last year, there is still a long way to go before the Federal Reserve will be able to sustainably get inflation back down to its target 2% range.


3.      Federal Reserve Projection/Guidance – A dot plot graph was released in this meeting, and according to the plotted graph in (Figure 1) 12 of the 19 committee members assessed that the central bank benchmark rate would be peaking in the range of 5.5-5.75%, while 5 members indicated the rate to remain unchanged for the rest of the year. However, in terms of the rate cut expectations for the subsequent years. This optimism was toned down as the projected federal funds rate at the end of 2024 and 2025 was revised up by 50bps (2024: 5.1%, 2025: 3.9%) as compared to the previous Summary of Economic Projection (SEP) that was back in June this year. This signals that we should buckle up for one more potential hike while we approach the end of this year as we are still a quarter percentage point away from the expected benchmark rate for this year.

4.     Dampening of Market Sentiments – Although the Fed kept its interest rates unchanged in this meeting, the signalling of an incoming additional hike at the end of this year and the possibility of further rate increases which has not been taken off the table has caused a dampening in market sentiments as rates will have to linger higher for longer. All three major indices were down with the Dow Jones Industrial Average -0.2% to 34,440.88, S&P500 -0.9% to 4,402.20 and lastly NASDAQ -1.5% to 13,469.13.


5.     Movement on US Treasury Yields – US treasury yields inched higher with a higher for longer rate outlook where the US 2-year Treasury bond yield rose +9bps to 5.19%, its highest since July 2006 (2026: 5.18%), while the yields for the US 10 years opened at 4.41% before closing at 3.43%. US treasury bills are tradable on our POEMS platform. For more information please visit












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About the author

Shawn Sng
Research Analyst

Shawn is a credit analyst who handles bond analysis and research for the fixed income desk. He graduated with a Bachelor of Science in Banking and Finance from the University of London.

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