FOMC Minutes

April 10, 2019

Today’s published FOMC minutes from the March 19-20 meeting do not include startling revelations not covered at Chairman Powell’s press conference. It was one of the most newsworthy meetings in a considerably long time, as policymakers

  • scrapped plans for rate hikes in 2019 and implied no more than one hike in 2020,
  • announced a decrease in balance sheet runoff in May followed by an end to that process after September,
  • acknowledged the continuing slowdown of U.S. growth (projecting only a 2% rise of GDP),
  • observed that inflation has not been symmetrically hovering around 2%, and
  • expressed concern that large corporate debt could prove burdensome to many firms.

All this was learned on March 20th, and today’s minutes simply indicate that some FOMC members had held out the possibility of a modest rate hike later in 2019 and recommended that the “patient” approach that characterizes current policy be reviewed regularly. At Powell’s press conference last month, he ducked a question on the dollar, saying that dollar policy is made by the Treasury Department. The minutes make no reference to the dollar being overvalued, as President Trump maintains, or undervalued. Since March 20th, the dollar has risen 0.7% against the euro and 0.8% on a trade-weighted basis but fallen 0.4% versus the yen. Another fact to emerge last month is that the current spread between the White House’s projected growth rate this year and the Fed’s is at its widest since the Great Recession.

President Trump is not the first president to be publicly critical of Fed policy, but I can’t recall any other since the dollar floated in 1973 expressing disappointment on this matter as much, as personally, and as harshly as Trump is doing. History is full of instances of political meddling in monetary policy backfiring to the detriment of financial markets and economic performance. That’s not going to deter this White House. President Trump’s best chance of getting reelected lies in keeping his fan base very enthusiastic, and like the president himself, his supporters care much more about whether he gets his way in each confrontation than about the consequences of his actions. As widely quoted in sports, “winning isn’t everything; it’s the only thing.” Even if the U.S. economy is in a recession next year, it will not matter to a fan base being fed a diet of psychic income from Trump winning so many of these skirmishes.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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