The Fed will decide on rates tomorrow.
Remember, they told us after the July meeting that they would be completely "data dependent" in determining the path forward for monetary policy.
And while the July hike was a unanimous decision (among the 11 voting members), we later found in the minutes from that meeting, that there was indeed some dissension. "Almost" all participants agreed to raising rates at the July meeting. "A couple" (assumably non-voters) favored leaving rates unchanged.
A week later or so, we heard from Jerome Powell at Jackson Hole, and he said the Fed was currently in restrictive territory, putting "downward pressure on inflation," and he reiterated that the Fed is data dependent.
So, since late July, the Fed has been looking for softening data to validate a pause, if not the end of the tightening cycle.
They've gotten it. With that, the Fed will leave rates unchanged tomorrow. The question: What will the new forecasts look like (the "summary of economic projections")?
This is from July …
If we step through the July projections, the data point that stands out is economic growth. The Fed has dramatically (to this point) underestimated the impact of the fiscal spend on real GDP growth. Through three quarters, actual growth is running about three times higher than the Fed's forecast. However, the employment and inflation data are closing in on the Fed's targets.