On the July FOMC

The written statement retained the word "substantial" to characterize the kind of progress required before tapering can begin, but relegated it to a mere quotation of prior statements. It reads like a tip-toe toward tapering, but then Powell's prepared press conference remarks used the word unambiguously. Answering reporter questions, Powell emphasized that a great deal of progress remains to be accomplished, but his clumsy improvisations create the impression that the is a split on the committee, with Powell representing the dovish side. With jobs still too few and inflation still too low, and the advantages of "running the economy hot" clearly on display as GDP is likely to print tomorrow morning at new all-time highs, there is no reason for the Fed to change policy at all. Any move toward the hawkish would be a policy error. For now at least, markets seem happy.