Monetary Policy

The labor market appears to have stabilized, GDP growth is comfortably above the economy’s long term non-inflationary growth potential of 1.9%, and inflation is above the 2% target. This mix of economic variables has created three groups within the FOMC. Those...

The FOMC chose to lower the Funds rate in September, October, and December, after significant revisions lowered job growth for May, June, and July last year on September 5. On September 9, the BLS revised job growth down from April 2024 through March 2025 by -911,000....

The stock market suffers significant declines when a good reason to sell develops, and being overvalued isn’t a good reason. High valuation does however leave the market vulnerable to a large decline when good reasons appear. History tells us it’s not a question of if, but...

I grew up in the Midwest and in January and February lakes and ponds would freeze over and allow ice skating since the ice was thick. As spring approached (never fast enough as I got older), the ice was thinner and skaters had to be careful. The worst sound a...

Economic data from the government has been sketchy since reports for August were released. Although the government collected data during September, no one was working during the government shutdown in October to process the data. The shutdown ended on November 12, so no data was collected in...

As expected the FOMC lowered the Funds rate by 0.25% and there were 3 dissents. Stephen Miran wanted a cut of 0.50%, and two district Presidents didn’t think a cut was warranted. Austan Goolsbee (Chicago) joined Jeffrey Schmid (Kansas City) who had dissented at the October 29 meeting (I...

The current structure of the FOMC was established in 1935 and for decades transcripts of the FOMC meetings were published with a lag of 5 years. In 1995 the FOMC began to publish the minutes of a meeting after the subsequent meeting which was usually 8-9 weeks later. This change was prompted by...

Bifurcation is inherently unstable since it creates a tension between sections of a whole and by definition shows that everyone isn’t pulling in the same direction. It’s difficult to solve challenging and complex problems even when everyone is seeking a common solution,...

On December 1 a Governor for the Bank of Japan indicated that the BOJ would likely increase their policy rate at the next meeting on December 19. Inflation has been consistently above the BOJ’s 2% target, with the Headline CPI at 3.0% in November and the Core CPI at 3.1%. On November 20 Japan’s...

The S&P 500 topped on October 29 and then pulled back as expectations for another rate cut at the December 10 FOMC meeting dimmed. In his statement before the press conference after the October 29 FOMC meeting, Chair Powell threw cold water on the prospects of a rate cut at the December...

On Sunday 8 Democrats voted with 52 Republicans to move forward and presumably end the longest government shutdown in history. The vote on November 9 came after 14 previous attempts failed. Five additional Democrats agreed to join the three Dems who had voted yes in the prior 14 votes. The...

As expected, the FOMC voted to end its Quantitative Tightening program on December 1, so it will no longer allow $5 billion of Treasury debt a month roll off. The FOMC did vote to continue allowing $35 billion a month of Mortgage-Backed-Securities (MBS) to roll off. The $35 billion will be...

At one time the phrase “ A watched pot never boils” meant time seems to pass more slowly when one is waiting for something to happen. The time waiting also allows expectations to grow and I remember when the event I had been waiting for finally...

The FOMC will lower the Funds rate by 0.25% when the FOMC meets on Wednesday October 29, which won’t be a surprise to anyone. Financial markets will react positively if the FOMC announces they will be ending their Quantitative Tightening program since this move represents another easing of...

After each FOMC member expresses their assessment of the economy, inflation, the labor market, and the appropriate level for the Funds rate during a FOMC meeting, Federal Reserve Chairs have attempted to build a consensus. During Ben Bernanke’s term as Chair (February 1, 2006...

Chair Powell noted that there is a real split within the FOMC. “We have 10 participants out of 19 who wrote down two or more cuts for the remainder of the year and nine who wrote down fewer than two cuts.” Based on the projections in the SEP, there is one group (9) who is more worried about...

In his Jackson Hole speech in August 2023 Chair Powell said, “ We are navigating by the stars under cloudy skies ". During Chair Powell’s press conference after the September 17 FOMC meeting he said, “ Right now is a particularly challenging time, even more uncertain than usual.” As Chair...

FOMC members will discuss at length the labor market and attempt to access its strength and whether recent reports elevate downside risks to job growth and higher unemployment. They will have a lot to discuss since most the of the recent data have shown softening of demand and hiring. The Ratio...