All Posts Tagged: inflation

Instant Analysis: July FOMC statement

Scott Anderson
Chief Economist

As we expected, the FOMC dropped a big hint in today’s FOMC  statement that implementation of the Fed’s balance sheet normalization plan will take place “relatively soon.”  I take that to mean an announcement at the next FOMC meeting on Sept. 20, with asset reductions beginning in October.

Closeup of intricate window designs on the Federal Reserve building.The FOMC helped the market digest the news of balance sheet normalization by softening the language on inflation, which the bond and fed funds futures markets took to mean a lower probability of additional rate hikes this year and into 2018.

The July FOMC statement replaced the language that inflation was running “somewhat below” 2% with more downbeat language that inflation was running “below” 2%.  While clearly a nod to more dovish FOMC members like Neel Kashkari, who dissented with the majority at the last FOMC meeting, I don’t see this as a material change in the FOMC thinking around the inflation outlook or rate-hike outlook, for that matter.  The statement kept the language on the outlook for inflation intact.

Fed funds futures now puts only a  38.5% probability of another interest rate hike from the Fed by December. It appears the markets see balance sheet normalization and fed funds rate hikes as substitutes rather than complements today.  A higher probability of balance sheet reduction means a lower probability of further rate hikes from the Fed.  I am not so sure that is the way the FOMC is thinking about this impending action; I still think the FOMC sees the two monetary policy actions — balance sheet normalization and Fed rate hikes — as compliments that are not inherently mutually exclusive.  Stocks and Treasury bonds rallied on the news, and the U.S. dollar weakened to 14-month lows.

On the economy, the statement slightly upgraded the assessment of the labor market, noting that job gains have been solid, while household spending and business investment continued to expand.

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U.S. Outlook: Where did inflation go?

Scott Anderson
Chief Economist
Graph showing rises and (recent) dip in consumer inflation trends.

As recently as March, inflation appeared to be heating up.

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Investment Insights: The odds of a 2019 recession

Wade Balliet
Posted by Wade Balliet
Investment Strategy
Silhouette of a business man watching red and yellow trend arrows going downward to the right, with a cloudy sky visible in the background.

Yes, the U.S. economy’s growth has been suppressed compared to historical data, but that may end up being a silver lining.

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U.S. Outlook: Fed gambles on inflation’s return

Scott Anderson
Chief Economist
Chart showing sales growth/loss by category, compared to a year ago.

Mixed messages continue to be thrown off by the U.S. economy.

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Instant Analysis: ‘Doves cry’ in the aftermath of the June FOMC statement

Scott Anderson
Chief Economist
Closeup on the eagle sculpture near top of the Federal Reserve building in Washington.

The FOMC failed to blink in the face of widespread market skepticism about the Fed’s projected fed funds rate path as it increased the fed funds target range by a quarter percentage point today to between 1.0 and 1.25%.

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