On the September FOMC

The recent softness in growth was not acknowledged at all in the FOMC statement, and has done nothing to delay tapering asset purchases. Indeed the statement language changes make November onset all the more likely. Powell indicated that tapering could be complete by the middle of next year. The “dot plots” for 2022 are now building in one half of a rate hike, compared to none at all in the June projections. Powell got three tough questions about securities trading by Kaplan and Rosengren, and his own holding of municipal bonds when he created the Municipal Liquidity Facility last year. These scandals have been promoted by “progressives” in Congress who oppose Powell, who enjoys broad support among “moderate” Democrats and most Republicans. He answered as well as he could, and we continue to expect him to be renominated – as we believe the market does too.