{"id":1479,"date":"2019-03-20T16:14:28","date_gmt":"2019-03-20T20:14:28","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1479"},"modified":"2019-03-20T16:14:28","modified_gmt":"2019-03-20T20:14:28","slug":"march-19-20-2019-fomc-meeting","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1479","title":{"rendered":"March 19-20, 2019 FOMC Meeting"},"content":{"rendered":"\n

In a Nutshell:<\/strong>  \u201c\u2026 the Committee will be patient as it\ndetermines what future adjustments to the target range for the federal funds\nrate may be appropriate.\u201d<\/em><\/strong><\/p>\n\n\n\n

Decision:<\/em><\/strong> Fed funds rate target range remains at 2.25% to 2.50%.\n<\/em><\/p>\n\n\n\n

After\nthe January FOMC meeting, I noted that the Fed has decided that it no longer\nhas to do anything, but I also thought it hadn\u2019t declared victory.  Well, they got pretty close to it today.  The Committee made it clear there is not\nlikely to be any rate hikes this year and maybe just one next year.  And, the dreaded balance sheet runoff, which\ninvestors believed was sapping the liquidity that bolstered the markets, will\nstart to slow in May and end in September. \n<\/p>\n\n\n\n

While\ninvestors may cheer the interest rate and balance sheet messages, they should\nnot overlook the economic forecast.  The\nFed downgraded its outlook for growth this year to just 2.1% and believes it\nwill be no more than 2% in the following two years.  <\/p>\n\n\n\n

Of\ncourse, that is what most economists would call trend, which means the labor\nmarkets will remain tight and wage gains will likely continue accelerating.  Can equity values grow decently under those\ncircumstances?  That is questionable, since\nproductivity appears stuck at a low level, demand is hardly rising, while labor\ncosts are on the rise.  That isn\u2019t a\nrecipe for strong earnings growth.<\/p>\n\n\n\n

So,\nwhere do we go from here?  Mr. Powell\ncontinues to argue that the Fed will watch the data and be patient when it comes\nto interest rates changes.  But the\nforecast also indicates the Fed doesn\u2019t think it is at \u201cneutral\u201d yet.  The possible increase next year, in the face\nof mediocre growth and limited inflation, says the members do want to raise\nrates at least a little.  How he pivots\nto that possibility in the face of 2% growth is anyone\u2019s guess.<\/p>\n\n\n\n

The\ntakeaway is that short-term interest rates are going nowhere.  Inflation is not likely to accelerate sharply\nsince demand is not expected to surge. Therefore, longer-term rates don\u2019t look\nto rise significantly.  But watch out for\nwages.  Their rise may not cause\ninflation to jump, but could cause earnings growth to falter.  <\/p>\n\n\n\n

(The next FOMC meeting is April 30-May\n1, 2019.)  <\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

In a Nutshell:  \u201c\u2026 the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate.\u201d Decision: Fed funds rate target range remains at 2.25% to 2.50%. After the January FOMC meeting, I noted that the Fed has decided that it no longer has … Continue reading March 19-20, 2019 FOMC Meeting<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1479","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1479","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1479"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1479\/revisions"}],"predecessor-version":[{"id":1480,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1479\/revisions\/1480"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1479"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1479"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1479"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}