The Fed has decided that tariffs are terrible. The only thing they aren't sure of is just how terrible. But they think policy is in the perfect position to respond to any kind of terribleness. All is well in the Little Kingdom.
FOMC Minutes
FOMC Minutes
Wednesday, February 19, 2025
The headline is that the FOMC sees the risks of inflation and unemployment as balanced. But the text makes clear they are more worried about inflation, and see the strong labor market as providing a free option on maintaining (what they think is) a restrictive policy. Relatively little hand-wringing about tariffs (we think they learned from the last meeting's embarrassing disclosures). But they let slip that they are expecting businesses to pass on tariff costs, but seeing the inflation effects as likely transitory. And they kicked off their review of their "monetary policy framework" with the assurance that the 2% inflation target is a sacred cow not to be disturbed.
FOMC Minutes
Wednesday, January 8, 2025
Here's the confession: they're pre-positioning for Trump tariffs and immigration restrictions: "All participants judged that uncertainty about the scope, timing, and economic effects of potential changes in policies affecting foreign trade and immigration was elevated. ...A number of participants indicated that they incorporated placeholder assumptions to one degree or another into their projections." Meanwhile, "A substantial majority of participants observed that, at the current juncture" policy is "still meaningfully restrictive." So let's keep it that way, just in case Trump does something, and just in case that might have some effect that we can't even imagine.
FOMC Minutes
Tuesday, November 26, 2024
Inflation isn't where they want it quite yet, but it's heading there. The labor market is at about maximum employment. Policy is still tight, they think, but they don't know how tight. They argue this all demands gradualism in rate-cuts. They say outright a pause is possible if inflation "remained elevated." We think this points pretty clearly to a 25 bp cut in December.
FOMC Minutes
Wednesday, October 9, 2024
We think the money quote is: "Participants emphasized that it was important to communicate that the recalibration of the stance of policy at this meeting should not be interpreted as evidence of a less favorable economic outlook or as a signal that the pace of policy easing would be more rapid than participants' assessments of the appropriate path." Instead, the idea was simply to move away from a restrictive policy posture. The only problem is that the members could come to no agreement whatsoever as to how restrictive policy is.
FOMC Minutes
Wednesday, August 21, 2024
It couldn't be plainer, except that Powell wasn't dovish enough in the July FOMC presser. The "vast majority" of participants think it will be appropriate to cut in September. "Several" said they could have supported a cut right then and there in July. Why? Here's the money quote: "A majority of participants remarked that the risks to the employment goal had increased, and many participants noted that the risks to the inflation goal had decreased. Some participants noted the risk that a further gradual easing in labor market conditions could transition to a more serious deterioration." The only question is whether it's one cut or two in September. The August jobs report will have a lot to do with that, and we'll get further telemetry from Powell at Jackson Hole on Friday.
FOMC Minutes
Wednesday, July 3, 2024
Magnificent Seven investors beware! Capitulation alert! The Fed says disinflation will continue as AI drives productivity gains! But the key passage:is this capitulation on the committee to our view that "the longer-run equilibrium interest rate was higher than previously assessed, in which case both the stance of monetary policy and overall financial conditions may be less restrictive than they might appear."
FOMC Minutes
Wednesday, May 22, 2024
Bless their hearts, as we say in Texas. They are asking the right questions for a change. Is policy truly very restrictive? Is immigration creating a labor supply boom? Is technology creating a productivity boom? The answers: no, yes and yes.
FOMC Minutes
Wednesday, April 10, 2024
Lots of detailed discussion of slowing the pace of balance sheet run-off. The first step will be to cut the pace by half -- and it sounds like it could come really soon. It'll just be Treasuries (for MBS, actual run-off is already well below the current monthly cap). Lots of concern that a replay of 2019's havoc in funding markets must be avoided. Rate cuts this year seem certain -- but with all the usual caveats about disinflation needing to continue.
FOMC Minutes
Wednesday, February 21, 2024
Sigh. All the evidence from statistics and contacts cited in the minutes is that inflation has been slain. But all the decision-weight is on the vague fear that all of a sudden it will surge higher. What markets want to know is what evidence, and how much of it, the Fed will need to be confident enough to cut rates -- but there's literally not a word about that here. But we can cling to this: "A few participants mentioned the possibility that economic activity could surprise to the upside and inflation to the downside..." And it's official that at the very next meeting they'll start the discussion about when to end balance-sheet run-off.