{"id":1555,"date":"2019-06-19T15:44:30","date_gmt":"2019-06-19T19:44:30","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1555"},"modified":"2019-06-19T15:44:30","modified_gmt":"2019-06-19T19:44:30","slug":"june-1819-2019-fomc-meeting","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1555","title":{"rendered":"June 18,19, 2019 FOMC Meeting"},"content":{"rendered":"\n

In a Nutshell:<\/strong>  \u201c\u2026 uncertainties about this outlook have\nincreased.\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

The Fed kept interest\nrates steady today, but signaled a rate cut could be coming.  <\/p>\n\n\n\n

The view of economic\nconditions was largely unchanged from the last meeting, when the FOMC indicated\nit would remain \u201cpatient<\/em>\u201d when it came to determining the direction of\npolicy.  While investment was viewed as \u201csoft<\/em>\u201d,\nconsumption \u201cpicked up<\/em>\u201d.  That is\nlargely a wash.  Labor market conditions\nwere still considered to be \u201cstrong<\/em>\u201d. \n And, the forecast for 2020 ticked\nup a little, form 1.9% to 2.0%.  So, it\ncan be said that if the Fed was signaling weakness, it had little to do with\nthe economy.<\/p>\n\n\n\n

What did change was the\ncategorization of inflation.  The\nstatement noted that \u201cMarket-based measures of inflation compensation have\ndeclined\u2026\u201d <\/em>It also stated, in the context of its views on both growth and\ninflation, that \u201cuncertainties about (<\/em>the) outlook have increased<\/em>.\u201d  Therefore, the Fed, instead of being patient,\nwill \u201cclosely monitor the implications of incoming information for the\neconomic outlook and will act as appropriate to sustain the expansion\u2026\u201d  <\/em><\/p>\n\n\n\n

Despite the lack of data pointing\nto a weak economy, of the seventeen board and bank presidents who provided\nforecasts, eight expect the funds rate to be cut this year and seven think it\nwill be reduced twice.  On the other hand,\neight think that rates will not change this year.  In addition, while only one member thought\nthere would be rate hike this year, three expect it to go up next year!  That is a pretty fractured Fed.  <\/p>\n\n\n\n

My problem with the\nstatement and the forecasts is that taken together, they are inconsistent.  Why signal that rates need to be cut when\ngrowth might actually be a little better than expected and in any event, is not\nshowing signs of faltering?  And do those\nwho want to ease really believe that a half point reduction in the funds rate\nwill cause inflation to accelerate?  I am\nnot sure what model would show that.<\/p>\n\n\n\n

If inflation is the great\nconcern, which it appears to be, then it is likely to take a lot more than 50\nbasis points to drive up inflation significantly.  It is not as if growth has been weak over the\npast year.  However, it doesn\u2019t look as\nif the Fed is prepared to go that route. \n<\/p>\n\n\n\n

So why did the Fed signal\na rate cut could be coming in the near term? \nThe only explanation I have is that the markets told them to say\nthat.  A failure to remove the word\npatient from the statement could have been greeted quite negatively by\ninvestors.  So the Fed gave the markets\nwhat they wanted \u2013 for now.  <\/p>\n\n\n\n

Ultimately, though, the\ndata will prevail.  If the economy is as\ndecent as I think it is, it will be hard for the Fed to cut rates without\nfurther declines in inflation, even if a growing number of members are no\nlonger patient.  (The next FOMC\nmeeting is July 30-31, 2019.)  <\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

In a Nutshell:  \u201c\u2026 uncertainties about this outlook have increased.\u201d Decision: Fed funds rate target range remains at 2.25% to 2.50%. The Fed kept interest rates steady today, but signaled a rate cut could be coming.  The view of economic conditions was largely unchanged from the last meeting, when the FOMC indicated it would remain … Continue reading June 18,19, 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-1555","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1555","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=1555"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1555\/revisions"}],"predecessor-version":[{"id":1556,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1555\/revisions\/1556"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1555"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1555"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1555"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}