FOMC Statement Conveys Little New Information

November 1, 2017

The FOMC statement was released at 18:00 GMT. Fifteen minutes later, key market prices — the dollar, 10-year Treasury yield, gold, oil and the DOW — were barely changed. The message was one of continuity.

The November 1, 2017 FOMC statement┬áreads almost identically to the one from the prior meeting on September 20. The current pace of economic activity expansion was upgraded from moderate to a “solid rate despite hurricane-related disruptions.” While post-hurricane rises in the price of gasoline lifted September total inflation, the statement as before notes that both total and core inflation have fallen since the start of the year and are below the 2% target. The appraisal of expected inflation reads the same verbatim and the remaining paragraphs of the statement’s main body and addendum are unmodified as well.

It comes as no surprise to investors that the 1.00-1.25% federal funds target and the rules governing balance sheet reduction were not changed. The interest rate decision, like those in July and September, was made unanimously. Janet Yellen chaired the meeting and will be in charge at the December FOMC meeting when a rate hike appears probable. There will be a press conference then, and new forecasts will be released. However, President Trump will be going public shortly with is selected appointee to be the next Fed Board Chair-person and it’s unlikely to be Ms Yellen. The rumor mill believes the nod will go to Jerome Powell, who has been on the Board of Governors since 2012 and has a similar voting record to Yellen’s.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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