2018/05/02 Commentary: Fed-ticipation II
© 2018 ROHR International, Inc. All International Rights Reserved.
Extended Trend Assessments reserved for Gold and Platinum Subscribers
Commentary: Wednesday, May 2, 2018
Fed-ticipation II
There is quite a bit of anticipation into the Federal Open Market Committee (FOMC) rate decision this afternoon and the accompanying statement. That is because this is a ‘statement only’ decision without and projections revisions or press conference. As such, it should be a more subdued affair that the March 21st full decision announcement that included both of those. However, these more concise expressions also lead to quite a bit more tea leaf reading on any subtle changes to the formal statement. In the first instance for your ease of comparison we offer our mildly marked-up version of the March 21st FOMC statement. Especially note that for all of the caveats that inflation “continued to run below (the Fed target of) 2 percent”, the overall assessment of the US economy was quite strong. Of course, rather than waiting until the overt higher inflation appearing, the FOMC is using that to justify hikes like the target federal funds rate bump from 1.25-1.50% to 1.50-1.75% seen at the March meeting.
As such, the anticipation is that the FOMC statement this afternoon will also remain quite positive on the US economy. That will be seen as paving the way for a further rate hike at its June 12-13 full projections revisions and press conference meeting. And the reason for that is also the shift illustrated in the opening graphic from academically oriented previous Fed Chairs Bernanke and Yellen to the more nuts-and-bolts practicality of Mr. Powell.
According to an article last November in Financial News (source of the opening graphic), JPMorgan Asset Management chief strategist David Kelly noted, “Volcker, Bernanke, Yellen, they were all intellectual leaders and would say what they thought. He has been circumspect in a way that seems quite deliberate…” That practicality likely means Powell is going to be less inclined to look for impacts from less than direct sources like any disruption in the equity markets. He is more likely to just monitor the actual conditions in the US economy, and only react once those are apparent.
While that may seem to create a situation where the Fed is classically ‘behind the curve’, it is actually very much in line with international cohorts like the ECB’s Draghi waiting for more sustained Euro-zone inflation prior to ending accommodation and BoE’s Carney’s recent awareness of lower-than-expected inflation and growth, even if…
Authorized Subscribers click ‘Read more…’ (below) to access balance of the discussion. Non-subscribers click the top menu Subscription Echelons & Fees tab to review options. As Market Observations (lower section) remain the same as in last Wednesday’s Commentary: Trump Triple Threat post, there is no Extended Trend Assessment.
