LHMeyer/Monetary Policy Analytics
Several policymakers continued to be wary of possible overheating risk. Kaplan argued that tax reform “makes it more likely that the headline unemployment rate is going to get into the 3s by the end of 2018…This legislation further adds to my conviction we should be moving gradually but deliberately in 2018” (Jan 17). He wanted […]
Remarks from a number of policymakers confirmed our inferences from the December dots (see our Naming the December Dots: Pace of 2018 Hikes). Bostic, Bullard, Harker, and Evans appeared to see fewer than three hikes as warranted in 2018; Dudley and Kaplan shared the median view of three hikes; and Rosengren saw more than three hikes […]
FOMC participants continued to debate the appropriate pace of rate hikes this year. Consistent with our deductions from the December dots (see our commentary), Harker saw only two hikes as likely to be appropriate as a result of his inflation outlook: “Inflation continues to run below target…I expect inflation will run a bit above target in […]
The only noteworthy policy comments last week came from Rosengren (12/27). He warned that “there are geopolitical risks that are now more severe than they were a couple years ago” but did not cite any specific areas. He also pointed toward systemic interest-rate risk as a potential development: “it’s not just the United States that […]
A couple of policymakers disagreed on how to interpret recent flattening of the U.S. Treasury yield curve. Kashkari argued that it meant inflation expectations might be drifting lower (Dec 19). While Kaplan also thought “The history of inversions is such that it has tended to be a pretty reliable forward indicator of recession,” he also […]
Following Wednesday’s FOMC meeting, the two members who dissented (Evans and Kashkari) offered full-throated defenses of their decisions. Evans favored a pause because it would have “better supported a general pickup in inflation expectations” (12/15). He argued that the FOMC needed additional time to ascertain inflation progress. Kashkari cited sluggish wage growth as evidence of […]
Evans’s interview was the only communication from a policymaker to be made public in the past week. He came out more strongly against a December hike than in previous remarks, citing the balance of risks to the inflation outlook: “I’ve been looking at the data, and the data have not been strongly indicating that we […]
The focus of policymaker comments turned to tax reform and the pace of rate hikes in 2018 as a rate hike next week looked more and more like a foregone conclusion. The progress on the Senate’s tax bill was a topic of interest. Dudley said now is “probably not the best time” for fiscal stimulus: […]
We read the minutes of the October-November FOMC meeting as somewhat dovish. Given our forecast, we’re still comfortable with three hikes in 2018. But both the apparent greater concern of the FOMC about downside risks to inflation and relatively subdued concern expressed about potential overheating make us see less risk of four hikes. As we […]
There appeared to be broad support among policymakers for three hikes next year, in line with the FOMC’s median projection. Mester noted that the neutral rate is rising but will still end up lower than it once was (Nov 16). In her speech, she referred to structural demographic shifts as weighing on labor force growth […]