Photo credit: International Monetary Fund
Comments
Pretty much a nothing-burger. Few significant changes, if any. The only interesting thing is that they have given up on inflation getting anywhere near 2% for now.
Despite lower unemployment levels, labor market conditions are still pretty punk. Much of the unemployment rate improvement comes more from discouraged workers, and part-time workers. Wage growth is weak also.
Equities flat and long bonds rise. Commodity prices are flat. The FOMC says that any future change to policy is contingent on almost everything.
Don't know they keep an optimistic view of GDP growth, especially amid falling monetary velocity.
The FOMC chops some “dead wood” out of its statement. Brief communication is clear communication. If a sentence doesn't change often, remove it.
In the past I have said, “When [holding down longer-term rates on the highest-quality debt] doesn't work, what will they do? I have to imagine that they are wondering whether QE works at all, given the recent rise and fall in long rates. The Fed is playing with forces bigger than themselves, and it isn't dawning on them yet.
The key variables on Fed Policy are capacity utilization, labor market indicators, inflation trends, and inflation expectations. As a result, the FOMC ain't moving rates up, absent improvement in labor market indicators, much higher inflation, or a US Dollar crisis.
