FOMC Preview

December 17, 2014

In the seven weeks since the late October FOMC meeting, the price of West Texas Intermediate oil has plunged 32.7%, and the 10-year Treasury yield has fallen by 25 more basis points.  Consumer prices in the five months since mid-2014 contracted 0.7% at an annualized rate, and core CPI rose only 1.1% annualized, which is well below the eventual pace sought by Fed officials.  U.S. share prices have been volatile but are not much changed on balance.  The dollar has climbed 8.2% against the yen and 2.2% versus the euro, but this changes only mitigate the implicit tightening of monetary conditions due to the other aforementioned developments.  Nonetheless, many analysts anticipate the deletion in its forward guidance of a prediction, based on the Fed’s assessment of relevant factors, that it likely will be appropriate to maintain the present 0-0.25% current fed funds range target for “a considerable time.”  Also of interest will be dissenting votes in the statement, new macroeconomic forecasts by the FOMC, and a scatter diagram showing when individual committee members believe is the most appropriate time to begin raising the fed funds rate.  Finally and most important is Chair Yellen’s press conference, which affords her the opportunity to modify and clarify the spin on the latest thinking of monetary policymakers.

  EUR/$ $/JPY 10Y, % DJIA Oil, $
06/30/04 1.2173 109.44 4.63 10396 37.95
06/30/05 1.2090 110.89 3.96 10370 57.00
06/29/06 1.2527 116.07 5.20 11077 73.41
06/28/07 1.3452 123.17 5.10 13456 69.82
08/07/07 1.3749 118.55 4.73 13510 72.27
09/18/07 1.3888 115.75 4.51 13475 81.42
10/31/07 1.4458 115.28 4.42 13873 93.59
12/11/07 1.4682 111.49 4.11 13645 89.78
01/30/08 1.4792 107.31 3.70 12454 91.70
03/18/08 1.5786 98.73 3.41 12257 107.53
04/30/08 1.5562 104.58 3.83 12953 111.54
06/25/08 1.5568 108.37 4.18 11837 133.62
08/05/08 1.5445 108.42 3.97 11484 119.82
09/16/08 1.4144 105.16 3.36 10936 91.18
10/08/08 1.3625 99.87 3.50 9447 87.02
10/29/08 1.2933 97.15 3.81 9145 67.38
12/16/08 1.3790 90.14 2.52 8687 44.14
01/28/09 1.3253 90.01 2.61 8356 42.92
03/18/09 1.3115 98.13 2.94 7340 47.73
04/29/09 1.3331 97.06 3.02 8194 51.05
06/24/09 1.3984 95.43 3.59 8373 68.76
08/12/09 1.4221 96.17 3.71 9366 70.64
09/23/09 1.4779 91.50 3.50 9859 69.13
11/04/09 1.4884 90.75 3.51 9896 80.66
12/16/09 1.4542 89.78 3.56 10478 73.14
01/27/10 1.4045 89.49 3.61 10148 73.31
03/16/10 1.3756 90.64 3.67 10645 81.45
04/28/10 1.3157 94.10 3.75 11043 82.57
06/23/10 1.2284 90.12 3.13 10307 76.50
08/10/10 1.3107 85.85 2.81 10605 79.94
09/21/10 1.3132 85.21 2.66 10747 73.05
11/03/10 1.4059 81.35 2.53 11174 84.59
12/14/10 1.3423 83.37 3.38 11497 88.47
01/26/11 1.3658 82.55 3.41 12001 87.36
03/15/11 1.3969 81.04 3.29 11815 98.09
04/27/11 1.4665 82.63 3.36 12612 112.48
06/22/11 1.4392 80.12 2.97 12175 94.87
08/09/11 1.4234 77.09 2.36 10993 81.76
09/21/11 1.3778 76.34 1.93 11377 86.74
11/02/11 1.3724 78.11 2.03 11805 92.77
12/13/11 1.3067 77.92 1.98 12130 100.20
01/25/12 1.3027 77.96 1.97 12670 98.85
03/13/12 1.3096 82.76 2.08 13044 106.34
04/25/12 1.3226 81.37 1.97 13096 104.13
06/20/12 1.2693 79.28 1.66 12837 83.63
08/01/12 1.2300 78.10 1.49 13028 88.98
09/13/12 1.2895 77.43 1.72 13342 97.60
10/24/12 1.2948 79.75 1.77 13115 85.72
12/12/12 1.3082 83.24 1.70 13325 87.13
01/30/13 1.3584 91.16 2.02 13949 97.63
03/20/13 1.2948 95.65 1.94 14497 92.82
05/01/13 1.3195 97.48 1.62 14740 90.47
06/19/13 1.3364 95.76 2.23 15304 98.38
07/31/13 1.3301 97.92 2.67 15565 105.63
09/18/13 1.3363 98.28 2.76 15606 107.01
10/30/13 1.3764 98.18 2.48 15660 97.42
12/18/13 1.3696 103.81 2.89 16198 98.06
01/29/14 1.3651 102.13 2.73 15719 97.23
03/19/14 1.3918 101.75 2.71 16335 99.96
04/30/14 1.3868 102.11 2.66 16553 99.52
06/18/14 1.3584 101.93 2.61 16892 106.12
07/30/14 1.3372 102.84 2.51 16878 101.45
08/17/14 1.2961 107.60 2.57 17151 94.05
10/29/14 1.2677 108.40 2.33 16956 82.51
12/17/14 1.2408 117.31 2.08 17145 55.49

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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