Fed Remains on Dovish Path

Stockholm (Ekonamik) – This week’s testimony to the US Congress by Jerome Powell, the Chairman of the Federal Reserve Open Market Committee (FOMC) appears to have led market analysts and media commentators to believe that the Fed is likely to lower rates in soon.

This reaction appears to have been triggered by the data published in the accompanying report to Congress, which is illustrated by the following quote from the testimony: “In our June meeting statement, we indicated that, in light of increased uncertainties about the economic outlook and muted inflation pressures, we would closely monitor the implications of incoming information for the economic outlook and would act as appropriate to sustain the expansion. Many FOMC participants saw that the case for a somewhat more accommodative monetary policy had strengthened.”

Fortunately, the report includes a summary of economic projections which contains detailed information summarising FOMC participants’ assessments of appropriate monetary policy over the next 36 months. Similarly to how the table we included in March showed the FOMC progress since December, the table below shows the committee’s progress between March and now, illustrating the increased dovish bias of the Fed.

It should be noted that the while the figures above clearly show a downward bias among Fed governors, a plurality of votes still seems to be happy at between 2.25% and 2.5%, its present range, so expecting an imminent rate cut seems still somewhat unwarranted. Of course, a rate cut in 2020 is now all but certain.

Video courtesy of CNBC



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