LHMeyer/Monetary Policy Analytics
Powell reportedly reiterated to House Democrats the Fed’s intention to proceed with a patient pace of rate hikes (Jun 27). Because inflation has been low, policymakers are able to proceed with rate hikes in a cautious manner. He reminded his audience that distributional issues are outside the Fed’s purview. Policymakers remained steadfast in their view […]
At an ECB conference in Portugal, Powell indicated that “concerns seem to be rising” about trade policy (June 20). He repeated that, “If you ask is it in the forecast yet, is it in the outlook, the answer is no. And you don’t see it in the performance of the economy.” However, he noted that […]
Following the FOMC meeting, a couple of policymakers discussed the appropriate pace of rate hikes, reiterating the consensus that rate hikes should continue at a gradual pace. Kaplan’s base case was three hikes this year, but an additional hike could be warranted (Jun 15). However, he was “very mindful of the fact that part of […]
The possibility of pausing rate hikes once the funds rate reaches its estimated neutral level continued to be debated. The most prominent policymaker to comment on this topic was Governor Brainard (May 31). Her outlook warranted moving “gradually from modestly accommodative today to neutral–and, after some time, modestly beyond neutral.” She thought that an inflation […]
Debate continued on what the FOMC’s strategy should be once the funds rate has been brought closer to estimates of its neutral level. Harker thought the funds rate was “getting close” to neutral, which he saw as 2.75% to 3% (May 24). In his view, “Let’s get to neutral and see how things play out, […]
Clarida explicitly aligned his views with Powell’s in terms of the ultimate size of the balance sheet: “I think the numbers…Powell has mentioned makes sense to me.” Clarida also said that “the ultimate destination…should be a lot smaller than it is today.” He also saw an important upcoming task to be determining “metrics” for when […]
Policymakers appeared to agree on a broad general interpretation of the symmetric inflation objective. Bostic wouldn’t be surprised to see a “modest overshoot” of 2% and thought that inflation above 2% for a while “is not a problem that would, in and of itself, necessitate a more aggressive policy response” (May 9). Instead, he saw […]
FOMC participants continued to discuss what the symmetric nature of the inflation objective means for policy. Bostic said, “Just because inflation goes a little above the 2 percent target doesn’t mean that we are going to panic or act in a dramatic way…This is not a declare a victory type of moment; it’s really, we […]
Kevin Burgett Given that there will be no press conference or updated projections and that markets are well aligned with the Committee’s expectation for a hike in June, there is little desire to make substantial changes to the statement. However, given that 12-month core PCE inflation is now essentially at 2%, some change in the […]
Kevin Burgett Last week, Richard Clarida was nominated to be Vice Chairman of the Board (Clarida: Completing the Troika). He has questioned participants’ projections of an unemployment rate falling further below the NAIRU without inflation overshooting the 2% objective and the funds rate moving above its neutral level. While participants’ projections moved in this direction […]