U.S. Outlook: Is tighter monetary policy already beginning to bite?
The September FOMC minutes, released Wednesday, revealed an upbeat assessment of current U.S. economic conditions and the outlook.
At the same time, the Fed dismissed the downside risks to the U.S. economy from Hurricane Florence, the China-U.S. trade war, and foreign economic developments as having only a small net effect on U.S. real GDP growth.
For more on this, see highlights of my report below, followed by a link to the full U.S. Outlook, delivered on Oct. 19.Key observations:
- It will still be quite some time before we see the impacts that the Fed tightening to date has had on our economic and financial conditions.
- The September FOMC minutes commented in several places about rising equity prices and loose financial conditions in the marketplace as a vulnerability and risk to financial stability.
- Interest-rate-sensitive sectors of our economy from housing to auto sales are already slowing in part due to higher interest rates.
- From my chair, the FOMC dot plot median feels like an economist’s fairy tale.