On the February FOMC

Donald L. Luskin
Wednesday, February 1, 2017
The Fed will be extremely gradualist as the economy pulls out of “secular stagnation.”
Strategic view: 

The FOMC acknowledges an improvement in sentiment, but has nothing directly to say about the aftermath of the election. It’s dropped its excuse of low energy and import prices for why inflation is still below target – and now has to predict a return to that target even though energy and import prices have already sharply risen. The FOMC’s stumbling exegesis of such things is increasingly irrelevant, though, as its center of intellectual gravity shifts toward the evaluation of policy in the context of the “natural” or “neutral” rate of interest. That policy stance will keep the Fed on the track of extreme gradualism as the economy pulls out of “secular stagnation.”