FOMC Preview
July 25, 2017
The Federal Open Market Committee began a two-day policy review today and will release a statement at 18:00 GMT (14:00 EDT) on Wednesday, July 26 announcing and defending its conclusions. This is the fifth scheduled meeting of 2017. There were previous 25-basis point hikes in the federal funds target range (now 1.00-1.25%) in March and June, as well as two initial such moves at the final meetings of 2015 and 2016. Policy settings are not expected to be changed at this meeting. The last time the FOMC raised its interest rate at consecutive scheduled meetings occurred in 2006. Moreover, a press conference is not scheduled to follow tomorrow’s announcement. All four prior rate hikes in this cycle were made at meetings in which a press conference had been scheduled.
The most important reason not to expect an interest rate hike now is that inflation this year has been decelerating rather than accelerating as Fed officials assumed. The total and core 12-month increases in the personal consumption price deflator were each 1.4% in May, that is closer to 1% than the target of 2% and down from 2.1% and 1.8%, respectively, in February. Chair Yellen’s semi-annual testimony earlier this month to Congress suggested that the recent slowdown of inflation is being viewed with somewhat more concern than when the committee met six weeks ago.
Since the June meeting, the dollar has fallen a bit more than 4.0% against the euro, lost ground in trade-weighted terms as well, but changed on net hardly at all versus the yen. The price of oil has risen 7% but only reversed a decline between the May and June meetings. Likewise, the 10-year Treasury yield is higher now than when the FOMC met in mid-June but only on a par with its level at the meeting in early May. These moves and a 1% rise of the DJIA are not going to influence the FOMC decision this month.
Things to watch for in Wednesday’s statement are
- Whether the slowdown of inflation is dismissed as transitory.
- Whether officials express concern that prolonged sub-target inflation might depress expected inflation.
- Whether the views on the labor market and components of aggregate demand have changed in any way.
- And whether anything specific is conveyed about plans to trim down the Fed’s $4.5 trillion balance sheet. Markets have been instructed previously to expect news on that matter by September.
EUR/$ | $/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 | 1.2409 | 117.58 | 2.11 | 17201 | 57.85 |
01/28/15 | 1.1337 | 117.77 | 1.78 | 17457 | 44.75 |
03/18/15 | 1.0637 | 120.98 | 2.05 | 17733 | 42.49 |
04/29/15 | 1.1164 | 118.67 | 2.05 | 18039 | 59.16 |
06/17/15 | 1.1255 | 124.22 | 2.39 | 17862 | 59.12 |
07/29/15 | 1.1073 | 123.61 | 2.29 | 17720 | 49.17 |
09/17/15
10/28/15 |
1.1334
1.1081 |
120.86
120.50 |
2.26
2.07 |
16778
17687 |
47.01
45.83 |
12/16/15
01/27/16 03/16/16 04/27/16 06/14/16 07/27/16 09/21/16 11/02/16 12/14/16 02/01/17 03/15/17 05/03/17 06/14/17 07/25/17 |
1.0956
1.0874 1.1089 1.1339 1.1205 1.0998 1.1160 1.1099 1.0641 1.0741 1.0638 1.0910 1.1149 1.1648
|
121.72
118.48 113.70 111.37 106.15 105.65 100.84 103.33 115.37 113.52 114.48 112.47 111.55 111.87
|
2.29
2.02 1.99 1.89 1.62 1.53 1.70 1.78 2.45 2.49 2.57 2.30 2.13 2.32
|
17583
16002 17217 18013 17675 18461 18151 17989 19915 19890 20885 20920 21375 21613 |
35.95
30.85 37.79 44.89 48.29 41.91 43.44 45.18 51.83 53.33 48.43 47.96 44.71 47.87
|
On June 14 when the fed funds rate was lifted to its current level, the following statement was released, explaining the move, and that statement was accompanied by updated forecasts on growth, unemployment, inflation, and the likely path of policy interest rates.
Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: FOMC preview