Last night Fed minutes killed off any September rate hike:
In their discussion of monetary policy for the period ahead, members judged that information received since the FOMC met in June indicated that economic activity had been expanding moderately in recent months. The labor market had also continued to improve, with solid job gains and declining unemployment. A range of labor market indicators, on balance, suggested that underutilization of labor resources had diminished since early this year. Members generally viewed these developments, toether with appropriate monetary policy accommodaion, as supporting their expectations for moderate economic growth in the medium term and for further improvement in labor market conditions. They also continued to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflationhad continued to run below the Committee’s longer-runobjective, but members expected it to rise gradually to- ward 2 percent over the medium term as the labor mar-ket improved further and the transitory effects of earlierdeclines in energy and import prices dissipated.In assessing whether economic conditions had im-proved sufficiently to initiate a firming in the stance ofmonetary policy, the Committee noted that, on balance,a range of labor market indicators suggested that un-derutilization of labor resources had diminished further.Most members saw room for some additional progressin reducing labor market slack, although several viewedcurrent labor market conditions as at or very close tothose consistent with maximum employment.
Many members thought that labor market underutilization would be largely eliminated in the near term if economica ctivity evolved as they expected. However, several were concerned that labor market conditions consistent with maximum employment could take longer to achieve,noting, for example, the lack of convincing signs of ac-celerating wages, which might be signaling that the natural rate of unemployment could currently be lower than they previously thought.
In considering the Committee’s criteria with respect to inflation for beginning policy normalization, most members viewed the incoming data as reinforcing their earlier assessment that, although inflation continued to run below the Committee’s objective, the downward pressure on inflation from the previous decreases in energy prices and the effects of past dollar appreciation would abate.
However, core inflation on a year-over-year basis also was still below 2 percent. Moreover, some members continued to see downside risks to inflation from the possibility of further dollar appreciation and declines in commodity prices. In addition, several members notedthat higher rates of resource utilization appeared to havehad only very limited effects to date on wages and prices,and underscored the uncertainty surrounding the infla-tion process as well as the role and dynamics of inflationexpectations. The Committee agreed to continue to monitor inflation developments closely, with almost all members indicating that they would need to see more evidence that economic growth was sufficiently strong and labor markets conditions had firmed enough for them to feel reasonably confident that inflation would return to the Committee’s longer-run objective over the medium term.
The Committee concluded that, although it had seen further progress, the economic conditions warranting an in-crease in the target range for the federal funds rate had not yet been met. Members generally agreed that additional information on the outlook would be necessary before deciding to implement an increase in the target range. One member, however, indicated a readiness to take that step at this meeting but was willing to wait for additional data to confirm a judgment to raise the target range.In their discussion of language for the post meeting statement, members agreed that the wording should reflect their assessment that economic conditions showed continued progress toward the Committee’s objectives.
The Committee updated the statement to indicate that eco-nomic activity had been expanding moderately in recentmonths and that it had seen further improvement in la-bor market conditions over the intermeeting period,pointing specifically to solid job gains and declining un-employment. In addition, the Committee agreed to statethat a range of labor market indicators suggested thatunderutilization of labor resources had diminished sinceearly this year, acknowledging the cumulative progressthat had been made in the labor market. The Committeealso modified the discussion of inflation developmentsslightly to recognize the more recent declines in energyprices while restating the expectation that inflation would rise gradually toward 2 percent over the mediumterm as the labor market improved further and the tran-sitory effects of earlier declines in energy and importprices dissipated. The Committee agreed to maintain the target range forthe federal funds rate at 0 to ¼ percent and to reaffirmin the statement that the Committee’s decision about how long to maintain the current target range for the federal funds rate would depend on its assessment of actual and expected progress toward its objectives of max-imum employment and 2 percent inflation. Membersalso agreed that their evaluation of progress on their objectives would take into account a wide range of information, including measures of labor market conditions,indicators of inflation pressures and inflation expectations, and readings on financial and international developments.
To further reflect the Committee’s assessment that economic conditions had continued to progress to- ward its objectives, the Committee slightly altered its characterization of when it anticipates that it will be appropriate to begin the process of policy normalization. Specifically, members agreed to indicate the Committee’s anticipation that it would be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term. The Committee also maintained its policy of reinvestingprincipal payments from agency debt and agencymortgage-backed securities in agency mortgage-backedsecurities and of rolling over maturing Treasury securi-ties at auction. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels,should help maintain accommodative financial conditions.
CPI was out too and managed a measly 0.1%, from the Cleveland Fed:
MEDIAN CPI UP 0.2% IN JULY
According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (1.8% annualized rate) in July. The 16% trimmed-mean Consumer Price Index also rose 0.2% (1.9% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics’ (BLS) monthly CPI report.
Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.1% (1.6% annualized rate) in July. The CPI less food and energy also rose 0.1% (1.6% annualized rate) on a seasonally adjusted basis.
Over the last 12 months, the median CPI rose 2.3%, the trimmed-mean CPI rose 1.7%, the CPI rose 0.2%, and the CPI less food and energy rose 1.8%.
In September 2007, the Federal Reserve Bank of Cleveland changed the way it constructs its median and trimmed-mean consumer price index (CPI) measures. The change was made to address potential distortions in the data’s inflation signals caused by the unusually large weight given to one component of the CPI: Owners’ Equivalent Rent (OER). By breaking the OER into four regional subindexes, the revised methodology improves the ability of the Bank’s trimmed-mean CPI data, particularly the median CPI, to measure underlying inflation trends. See the full report.
With oil crashing, forgedaboudit.
