So the big event of the week, the Federal Open Market Committee (FOMC) announcement released today at 2:15pm EST, turns out to be a non-event.
As if we didn’t already know it: THE FED IS ON HOLD. “There is no sense that policy is anything but on hold,” said David Ader, fixed income strategist at RBS Greenwich Capital.
In their description of the economy we get “Economic growth slowed in the first part of this year” from “Recent indicators have been mixed” (March 21). Right guys, we know: Preliminary Real GDP came in a couple Friday’s ago at 1.3%. We got that. Thanks.
Their economic forecast was exactly the same: “Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters”. Bernanke sure is optimistic!!!! I wonder if he read The Secret.
As far as the description of inflation: it IS elevated (“Core inflation remains somewhat elevated”) not just recent readings of it (“Recent readings on core inflation have been somewhat elevated”).
Last Monday (4/30), the Personal Consumption Expenditure price index, exluding food and energy, so called “Core PCE”, said to be the Fed’s preferred inflation guage, came in at an annualized rate of 2.1% in March, down from 2.4% in February (see Table 11, at the very bottom, “Price Indexes for Personal Consumption Expenditures: Percent Change from Month One Year Ago”).
The inflation forecast is the same.
As is the policy statement: “Future policy adjustments will depend on ……”
David Gaffen of MarketBeat wrote:
“… its assessment of what is to come – expectations for the economy to continue to expand and concern about inflation pressures – seems to have been generated with the official Federal Open Market Committee copying machine.
Looks like Justin Lahart got it right in this morning’s “Ahead of the Tape” column “Heavier Forces On Two Sides Weigh on Fed” (subscription required): “Here’s some suggested wording: All around, things have gotten a little worse”.
Seems like the Fed acknowledged this by getting rid of “recent indicators” and “recent readings” and just flat out saying economic growth has slowed and inflation remains somewhat elevated. No more, seems like, reports show, etc….
At the same time, the forecast calls for everything to turn out rosy i.e. the economy is likely to expand at a moderate pace and inflation pressures are likely to moderate. Official Federal Open Market Committee shirt collar starch seems to be in as good working order as their copy machines!!!!!