FOMC Preview

November 3, 2021

Significant financial market movements have transpired in the six weeks since the Federal Open Market Committee last met. The ten-year Treasury yield is a quarter percentage point higher now, and the dollar has appreciated 4.5% against the yen and 1.3% versus the euro. The Dow Jones Industrial Average closed at a record high yesterday and is 4.9% higher now than six weeks ago. Inflation caused by elevated oil prices and supply-side bottlenecks drew considerable attention at the September meeting of policy makers, and the price of WTI is 13.5% higher now than then and in fact at its most elevated level among FOMC meetings held during the last seven years.

At his last press conference, Chairman Powell gave notice that bond-purchase tapering would begin possibly after the November meeting and almost certainly before the end of this year. The inflation mandate was virtually met, and much progress on the employment mandate had occurred. Updated forecasts then called for nearly 5% per annum GDP growth over the two years 2021-22, and projected inflation in 2021 was revised considerably higher again to 4.2% from 3.4% presumed at the June meeting and 2.4% when the group met in March. Powell as much as said that monthly net asset purchases, which have been proceeding at a pace of $120 billion per month, would bee fully ended by the middle of 2022. And the dot plot diagram of individual FOMC member desired interest rate levels going forward revealed that lift-off would start sooner, with about two moves during 2022 and another three hikes in 2024.

Two wild cards to bear in mind at the current juncture are the economic path forward is fraught with uncertainty. Growth remains a hostage to the waxing and waning of the Covid pandemic. Fiscal policy for the coming year haven’t been cemented. Supply shortages are more pronounced and more difficult to unwind than had been presumed. The other wild card involves the composition of FOMC members. Biden hasn’t yet indicated if Powell or somebody else will be his preference for Chairman after January. There are other vacancies to be filled on the Board of Governors, and a new year means a rotation of presidents with voting privileges. Other things being the same, the FOMC is thought likely to have a more dovish tilt next year.

Today’s meeting will not be accompanied by updated forecasts. The final scheduled meeting this year will be on December 14-15.

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

04/28/21

06/16/21

07/28/21

09/22/21

11/03/21

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

1.1908

1.2071

1.2126

1.1812

1.1722

1.1570

 

 

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

109.27

108.80

109.97

110.09

109.23

114.14

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

1.66

1.62

1.49

1.25

1.31

1.56

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

32,868

33,908

34,251

34,938

34,279

35,964

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

64.30

63.70

72.32

74.25

71.94

81.66

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission. 

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