by Calculated Risk on 8/15/2017 05:48:00 PM

Two notes from Tim Duy at Fed Watch. First a few excerpts from: Retail Sales, Dudley, Wages

[Duy write] 5.) But - and I think this is important - financial conditions continue to easy despite rate hikes:

[Dudley said] Now the reason why I think you’d want to continue to gradually remove monetary policy accommodation, even with inflation somewhat below target, is that 1) monetary policy is still accommodative, so the level of short-term rates is pretty low, and 2) and this is probably even more important, financial conditions have been easing rather than tightening. So despite the fact that we’ve raised short-term interest rates, financial conditions are easier today than they were a year ago.

The stock market’s up, credit spreads have narrowed, the dollar has weakened, and those have more than offset the effects of somewhat higher short-term rates and the very modest increases that we’ve seen in longer-term yields.

[Duy] Overall, Dudley continues to adhere to what amounts to the Fed's median forecast, and that means he thinks another rate hike this year is solidly in play.

And from Duy: Don't Add To The Fire

I have no qualms with the criticism that the Fed's is excessively focused on inflation or, more accurately, possibly working with a broken model of inflation. That's fair game.

What I find disturbing and quite frankly irresponsible is the use of "deep state" language to describe the Fed. This is the language used by the far right to discredit and undermine faith in our government institutions. For the left to adopt the same language adds to the fire already burning.

Wednesday:
• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:30 AM, Housing Starts for July. The consensus is for 1.225 million SAAR, up from the June rate of 1.215 million.

• At 2:00 PM, FOMC Minutes for the Meeting of 25 - 26, 2017