FOMC Watch

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Stanley Fischer argues for Central Bank Discretion

In a speech yesterday, Fischer says: Today I will offer some observations on monetary policy rules and their place in decision-making by the Federal Open Market Committee (FOMC). I have two messages. First, policymakers should consult the prescriptions of policy rules, but–almost needless to say–they should avoid applying them mechanically. Second, policymaking committees have strengths that

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The FOMC Statement for May showed up some contradictions in Fed policy. They have made it clear that they think the economy is growing modestly above trend. Hence, we still get rate rises, projections for more rate rises, plus the chatter about shrinking the balance sheet. The Fed really do seem to be watching RGDP on an

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From the News: Don’t bet on the Federal Reserve blinking again. U.S. central bankers appear to be on course to raise interest rates twice more this year and remain confident in their forecast for growth of around 2 percent despite a series of weak first-quarter reports. That’s a shift from past performance, when they backed

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The president of the NY Fed really is the main man. Last week he surprised us by not elaborating on the Fed’s supposed disappointment with the market’s positive reaction to the rate hike in March. Instead, he expanded on a new idea on the importance of “financial conditions” in setting monetary policy. While he claimed with no

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Ever since the Fed raised rates in March and rumors swirled that it was unhappy with the market’s dovish response we had been expecting the FOMC to “correct” the market. Last week, Bill Dudley, the markets’ man from the NY Fed neglected to do this in his important speech – and the markets noticed the absence. Therefore, we did

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The FOMC pounced two weeks ago, today it stepped back

Two weeks ago in a synchronized procession the important members of the FOMC, from Dudley to Brainard to Yellen and Fischer, let it be known that they would raise rates today.  They did. What they did not do was significantly raise their projections for the economy or for the path or rate rises. They did

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Weak foundations for Fed tightening bias

New York Fed William Dudley set the “foundations” for the tightening scenario. Dudley:  “Since the election we’ve seen very large increases in household and business confidence, we’ve seen very buoyant financial markets — the stock market is up, credit spreads are narrow. And we have the expectation that fiscal policy will probably move in a more

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Yellen confirms: Monetary Policy is not subject to lags, and interest rates do not define the stance of policy.

Yellen starts off: I will spend most of my time today discussing the rationale for the adjustments the Committee has made since 2014, a year that I see as a turning point, when the FOMC began to transition from providing increasing amounts of accommodation to gradually scaling it back. That´s true. However, two paragraphs later,

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Brainard not going to allow an economy to run hot, shame

As Market Monetarists, we think the Fed should be guided by the market’s view of nominal growth expectations. Unfortunately, there is no market in nominal growth expectations. We devised a market-influenced forecast for NGDP growth 12 months into the future as a sort of proxy for the market price. It has been rising steadily since

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