FOMC Preview
May 1, 2024
The Fed is in a difficult bind, partly resulting from the shift toward making policymaking more transparent. Four enormous shocks over the past two decades have eroded general confidence in all institutions of authority including the Fed: the financial crisis of 2007-8, a technology revolution that has transformed how economic and other news get received, the Covid-19-pandemic, and the emergence of a multi-dimensional cold war whose dynamics are infinitely more complicated than the post-WW2 contest between Russia and the United States.
Two critical conditions for successful monetary policy-making are now in jeopardy: credibility and actual and perceived independence. For Fed policy to be trusted, financial market participants need to share the journey of policymaking with officials, understanding the goals of policy, getting timely alerts when official expectations shift, and receiving a constant stream of updates on information relevant to policy decisions. A second conditions of credibility calls for maintaining the market’s trust in the judgement and competency of officials. Fed officials feel compelled to actively engage in the forecasting game but equally hope to avoid acquiring a flip-flopping reputation that could corrode the relevance of forward policy guidance. Every piece of guidance comes with a caveat that no decisions are pre-determined. Policy surprises are to be avoided, but some are unavoidable. The string of transforming shocks have regrettably forced the Fed to shift gears significantly too many times in a short period of time and has cast a lot of scrutiny to some huge policy misses regarding the near-term path of inflation.
Interest rate cuts will not begin at the next meeting in June. The data just don’t allow that, nor can a fresh date be placed on when rate normalization might begin and how quickly subsequent moves might follow. Chairman Powell will deny that the political calendar has any place in the policy-making calendar, but the reality is that by being true to the pursuit and prioritization of goals that often lie in conflict over a short time horizon, they could be forced to put long-term policy in jeopardy. That’s the current dilemma. The political choice facing voters offers disparate narratives for the continuing independence of monetary policy, and delaying rate reductions will invariably enhance risks to the Fed remaining free from political interference. So the more reliable path for reducing U.S. inflation to the 2% goal next year also carries a clear risk of higher average inflation during the ensuing 3-5 years.
Data and Fedspeak since the prior Fed announcement on March 20 have prepared markets for a more disappointing policy path, depressing risky assets like equities and crypto but strengthening the dollar and raising long-term interest rates significantly. Oil, by contrast, had experienced only marginal net change.
| 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 12/15/21 01/26/22 03/16/22 05/04/22 06/15/22 07/27/22 09/21/22 11/02/22 12/14/22 02/01/23 03/22/23 05/03/23 06/14/23 07/26/23 09/20/23 11/01/23 12/13/23 01/31/24 03/20/24 05/01/24 |
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 1.1581 1.1255 1.1287 1.0983 1.0536 1.0438 1.0129 0.9884 0.9884 1.o686 1.0988 1.0792 1.1047 1.0860 1.1065 1.0672 1.0563 1.0875 1.0840 1.0855 1.0681 |
121.72
118.48 113.70 111.37 106.15 105.65 100.84 103.33 115.37 113.52 114.48 112.47 111.55 111.17 111.34 113.91 112.58 109.31 106.27 109.91 110.38 111.69 112.94 113.88 112.26 109.55 111.42 111.17 108.36 108.59 108.16 108.89 108.62 109.14 107.21 108.33 111.26 106.73 107.24 104.84 105.00 103.68 103.65 104.07 109.27 108.80 109.97 110.09 109.23 114.01 113.98 114.36 118.62 130.10 133.82 137.31 144.08 146.93 134.86 128.93 132.57 135.22 139.38 140.82 148.06 150.87 142.93 146.58 151.60 157.68 |
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 1.45 1.78 2.19 2.98 3.34 2.77 3.56 4.03 3.51 3.41 3.54 3.37 3.79 3.89 4.35 4.79 4.02 3.97 4.28 4.66 |
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 35,894 35,493 34,594 33,726 33,242 30,806 31,846 30,850 32,524 34,175 34,093 32,466 33,689 34,108 35,418 34,553 33,226 37,090 38,380 39,144 37,888 |
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 81.14 70.39 87.40 95.70 107.71 116.24 97.36 83.70 88.57 77.56 76.80 70.32 68.70 69.38 78.93 90.28 82.86 69.77 75.92 81.70 80.52 |
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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