The most important element in next week's FOMC meeting may come from the dot plot and whether Fed officials back away from the two hikes thought appropriate in March. When looking at the schedule of FOMC meetings, and understanding that when the Fed says "gradual" to describe the normalization process, it does not mean hiking at back-to-back meetings, seeing two hikes this year without a summer move is difficult.
After the late-July meeting there are three remaining FOMC meetings: September 21, November 2 and December 14. Some observers have suggested that the September and November meetings are too close to the November 8 election for the Fed to take action. The Fed's modern historical record during presidential years does not bear that out. The September meeting is fair game. In fact, there have been few times where the Fed moved in October ahead of the November election.
Here is a quick summary beginning with the 1980 election:
- 1980: Fed hikes by 100 bp twice in September.
- 1984: After hiking by 75 bp in late-August, Fed begins easing in early Oct (25 bp) and proceeds to continue to cut a day after the election (Nov 7 bp 50 bp). It cuts again in late-November (50 bp).
- 1988: Tightening stops in August and Fed continues to tighten in late-November (13 bp).
- 1992: Fed cuts in July (50 bp) and again in early-September (25 bp).
- 1996: Policy on hold after a January cut (25 bp).
- 2000: Fed hikes in May (50 bp) and then cuts in January 2001 (50 bp).
- 2004: Tightening mode with hikes (25 bp) in June, August, September and a week after November 2 election.
- 2008: Aggressive easing mode. Cuts rates four times in the first half (225 bp) and cuts rates twice. (50 bp a move) in October before bringing the Fed funds target to 0-25 bp in December.