FOMC Watch

The September meeting released a new set of projections from FOMC members for the Real GDP growth, the unemployment rate, PCE inflation, core PCE inflation and the expected path of the Fed funds rate. Real GDP is expected to be around 2%, unemployment to remain below 5%. PCE inflation is expected to accelerate from the current 1% to 2% and remain there. The chart is almost comical. The 2% projections look like a ceiling, and are a ceiling. If the projections breached 2% the FOMC would be tightening, no doubt at all. They want to tighten now but common sense… Read More

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NB I only use the word hawk for wanting tighter monetary policy at the moment. I would be hawkish if nominal growth had been running well above 5% for a few years. Dovish only means wanting neutral or looser monetary policy at the moment. These terms are completely relative to current or expected conditions. And always will be. 7-3, close, but not that close The FOMC meeting was very notable for the “dissent” of three regional Presidents. That is three of the four who have a vote in the FOMC. It is quite a powerful bloc. If the fourth regional Fed voter,… Read More

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In the early part of the month there were tentative signs that the Fed would do something.  Bill Dudley, of the New York Fed, recognized that growth was weak and monetary policy only moderately accommodative. On August 15, John Williams of the San Francisco Fed published “Monetary Policy in a Low R-star World”: [M]onetary policy frameworks should be critically reevaluated to identify potential improvements in the context of a low r-star. Although targeting a low inflation rate generally has been successful at taming inflation in the past, it is not as well-suited for a low r-star era. There is simply… Read More

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