FOMC Preview
March 17, 2021
Since the last FOMC meeting seven weeks ago, investors have embraced riskier assets. The 10-year Treasury yield is 67 basis points higher now than then, and the DJIA is up 7.7%. The price of West Texas Intermediate crude oil has soared 21%, while gold has weakened 6.5%. the dollar has risen 5.0% against the yen, 1.8% relative to the euro, and 1.4% on a trade-weighted basis.
The outlook for U.S. growth this year has improved, thanks to the vast American Rescue Plan, slower trends in Covid cases, hospitalizations and deaths, and a faster roll-out of vaccinations than was imagined at first. Inflation has picked up pace both globally and in the United States. More importantly, expectations of inflation later this year have climbed on the anticipation of pent-up demand, supply chain shortages, and energy prices that have already moved considerably higher.
Fed officials have said they will look through the anticipated rise of inflation near term. In fact, that upward path of inflation is embraced in the Fed’s stated goal of putting inflation “on a track to moderately exceed 2 percent for some time. The last set of FOMC macroeconomic projections released three months ago had bumped projected growth up to 4.2% in 2021 and 3.2% in 2022. The 2023 growth forecast of 2.4% was a third again higher than the longer run trend, which they believed to be 1.8%. Officials also revised the expected jobless rate lower such that it was projected at 3.7% by 2023. In spite of that, the forecast only showed inflation rising to 2.0%, not above such.
Updated forecasts will be revealed at this meeting, and growth will undoubtedly be revised up again. So likely will be inflation at least in the early years. The big uncertainty is whether these changes are enough in revised the predicted likely path of the fed funds rate. The current forecast didn’t anticipate a rise even by 2023, and the pace of asset buying wasn’t reined in at the January meeting. Even more recently, Chairman Powell’s semi-annual testimony last month to Congress on the economy and monetary policy went out of its way to stress that the U.S. economy remains a “long way” from achieving the central bank’s goals regarding the labor market and inflation, and the goals have qualitative as well as quantitative properties. Growth needs to be less uneven than now.
| 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 09/20/17 11/01/17 12/13/17 01/31/18 03/21/18 05/02/18 06/13/18 08/01/18 09/26/18 11/08/18 12/19/18 01/30/19 03/20/19 05/01/19 06/19/19 07/31/19 09/18/19 10/30/19 12/11/19 01/29/20 03/03/20 03/15/20 03/23/20 04/29/20 06/10/20 07/29/20 09/16/20 11/05/20 12/16/20 01/27/21 03/17/21 |
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 1.1735 1.2010 1.1631 1.1815 1.2424 1.2271 1.1963 1.1788 1.1668 1.1765 1.1400 1.1420 1.1415 1.1355 1.1244 1.1217 1.1132 1.1066 1.1117 1.1112 1.1002 1.1179 1.1087 1.0697 1.0859 1.1367 1.1787 1.1824 1.1814 1.2174 1.2115 1.1904
|
121.72
118.48 113.70 111.37 106.15 105.65 100.84 103.33 115.37 113.52 114.48 112.47 111.55 111.17 111.34 113.91 112.58 109.31 106.27 109.91 110.38 111.69 112.94 113.88 112.26 109.55 111.42 111.17 108.36 108.59 108.16 108.89 108.62 109.14 107.21 108.33 111.26 106.73 107.24 104.84 105.00 103.68 103.65 104.07 109.26 |
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 2.29 2.24 2.35 2.34 2.73 2.89 2.97 2.96 2.99 3.08 3.23 2.81 2.72 2.57 2.48 2.08 2.02 1.75 1.80 1.80 1.61 1.01 1.01 0.81 0.61 0.77 0.59 0.67 0.77 0.91 1.01 1.68 |
17583
16002 17217 18013 17675 18461 18151 17989 19915 19890 20885 20920 21375 21711 22376 23405 24585 26259 24839 24095 25309 25310 26543 26195 23881 24841 25727 26624 26452 27210 27048 27067 27877 28833 25917 23185 18592 24667 27169 26467 28196 28418 30,125 30,554 32,903 |
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 48.75 50.55 54.24 56.60 64.41 65.00 67.57 66.77 67.62 71.68 60.93 47.80 54.51 59.48 63.38 53.65 58.48 58.16 54.60 58.68 53.52 47.18 31.73 23.36 15.30 39.05 41.22 40.00 38.84 47.77 52.81 63.92 |
Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: FOMC preview
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