FOMC Minutes

May 23, 2018

Comments within the May 1-2 minutes regarding U.S. economic conditions and prospects are unsurprising and embody little change. The labor market is strengthening, GDP growth is moderately paced, and inflation is hovering not far from target.

One excerpt always of interest is the language on likely future monetary policy:

With regard to the medium-term outlook for monetary
policy, all participants reaffirmed that adjustments to the
path for the policy rate would depend on their assessments
of the evolution of the economic outlook and
risks to the outlook relative to the Committee’s statutory
objectives. Participants generally agreed with the assessment
that continuing to raise the target range for the federal
funds rate gradually would likely be appropriate if
the economy evolves about as expected. These participants
commented that this gradual approach was most
likely to be conducive to maintaining strong labor market
conditions and achieving the symmetric 2 percent inflation
objective on a sustained basis without resulting in
conditions that would eventually require an abrupt policy
tightening. A few participants commented that recent
news on inflation, against a background of continued
prospects for a solid pace of economic growth, supported
the view that inflation on a 12-month basis would
likely move slightly above the Committee’s 2 percent objective
for a time. It was also noted that a temporary
period of inflation modestly above 2 percent would be
consistent with the Committee’s symmetric inflation objective
and could be helpful in anchoring longer-run inflation
expectations at a level consistent with that objective.

The minutes note that committee members’ confidence had increased that inflation will run close to target but qualified that assertion with some caution. ” it was noted that it was premature to conclude that inflation would remain at levels around 2 percent, especially after several years in which inflation had persistently run below the Committee’s 2% objective.

As for possible policy in the near term,

Most participants judged that if incoming information broadly  confirmed their current economic outlook, it would likely soon be appropriate for the Committee to take another step in removing policy accommodation.

And while FOMC members are not unduly worried about the flattening yield curve, believing such to be due to benign circumstances, they are taking a trust but verify approach to this development.

Several participants thought that it would be important to continue to monitor the slope of the yield curve, emphasizing the historical regularity that an inverted yield curve has indicated an increased risk of recession.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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