Canaccord Genuity Morning Coffee: FOMC Meeting Preview
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Canaccord Genuity Morning Coffee on FOMC Meeting Preview
"Hey Mort, do these suppositories come in other flavours?" – Peter Griffin, Family Guy.
The next Federal Open Market Committee (FOMC) interest rate announcement will be on Wednesday, April 25. Stronger-than-expected economic data in the last six months or so is welcome news, surely to the 1.1 million Americans who gained payroll employment, and perhaps especially to the more dovish wing of the FOMC. The purpose of their ultra-accommodative monetary policy, after all, is to get the economy out of the doldrums. There is no particular urgency to change the prescription when the medicine is working. In practical terms, this means that next week’s FOMC meeting is unlikely to call for either a sooner tightening or a near-term further easing of policy. According to Credit Suisse, the majority opinion on the FOMC, remains as it has been: if the economy strengthens, take it; if the economy should show signs of faltering, administer further doses of monetary medicine. The FOMC’s updated economic and fed funds rate projections may be the most interesting part of the information flow next week. There is always the risk that Fed Chairman Bernanke will say something unexpected in his post-meeting press conference. One should listen closely for any indication that his commitment to the FOMC’s "late 2014" forward policy guidance is wavering or, alternatively, that he favours additional stimulus later this year. While pressure is building on the FOMC to reconsider its late 2014 policy guidance, Credit Suisse believes any change would be premature. Still-elevated unemployment, continued declines in home prices, the prospect of fiscal austerity, and the ever-present risk of a flare-up in European debt markets all suggest that the FOMC majority will continue to favour at least the current degree of monetary accommodation.
"Hey Mort, do these suppositories come in other flavours?" – Peter Griffin, Family Guy.
The next Federal Open Market Committee (FOMC) interest rate announcement will be on Wednesday, April 25. Stronger-than-expected economic data in the last six months or so is welcome news, surely to the 1.1 million Americans who gained payroll employment, and perhaps especially to the more dovish wing of the FOMC. The purpose of their ultra-accommodative monetary policy, after all, is to get the economy out of the doldrums. There is no particular urgency to change the prescription when the medicine is working. In practical terms, this means that next week’s FOMC meeting is unlikely to call for either a sooner tightening or a near-term further easing of policy. According to Credit Suisse, the majority opinion on the FOMC, remains as it has been: if the economy strengthens, take it; if the economy should show signs of faltering, administer further doses of monetary medicine. The FOMC’s updated economic and fed funds rate projections may be the most interesting part of the information flow next week. There is always the risk that Fed Chairman Bernanke will say something unexpected in his post-meeting press conference. One should listen closely for any indication that his commitment to the FOMC’s "late 2014" forward policy guidance is wavering or, alternatively, that he favours additional stimulus later this year. While pressure is building on the FOMC to reconsider its late 2014 policy guidance, Credit Suisse believes any change would be premature. Still-elevated unemployment, continued declines in home prices, the prospect of fiscal austerity, and the ever-present risk of a flare-up in European debt markets all suggest that the FOMC majority will continue to favour at least the current degree of monetary accommodation.
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