Shift in message
As was expected there were no real fireworks at the last FOMC meeting. However the slight adjustment to statement wording speaks volumes as to the realities of the US economy. Although there was no change to the forward guidance language, the subtle shift in wording on the inflation and labor markets provided a clearly less dovish tone. Critically, the addition to the statement was the wording “inflation has moved somewhat closer to the Committee’s longer-run objective” and “the
likelihood of inflation running persistently below 2% has diminished somewhat”. Even with the watered down noncommittal language, the emphasis was clear. We on numinous occasions have pointed out upside risk to inflation and now the Fed has acknowledged this change. In a slightly less meaningful adjustment, although still noteworthy, labor markets were no longer described as “remaining elevated.” And finally, unlike the prior meeting, known hawk Philadelphia Fed president Plosser
was a lone dissenter.
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