On the June FOMC

The 2023 “dots” now forecast two rate hikes, up from zero forecasted in May. But this only matches expectations already embedded in forward prices. The SEP upgraded expectations for growth, unemployment and inflation. It’s something of an embarrassment that the forecasted real GDP growth rate for 2023, without assuming the White House’s massive spending proposals, is higher than the White House’s own forecast that does assume them – implying the economy is better off with them. Moreover, Powell admitted that unemployed persons will seek work when enhanced unemployment benefits run off, suggesting that the benefits were a policy error. Neither help Powell’s re-appointment prospects. Powell finessed the question of tapering, moving past the “talking about talking about” trope. Yields should move higher regardless in virtue of improving growth. Inflation was not intensely questioned in the presser, anecdotal evidence that self-fulfilling expectations are anchored.