by Calculated Risk on 7/29/2019 01:54:00 PM
Monday, July 29, 2019
FOMC Preview
Expectations are the FOMC will cut the Fed Funds rate 25bp at the meeting this week.
Here are some comment from Professor Tim Duy: It’s Rate Cut Week
Bottom Line: Look for 25bp from the Fed this week with a signal that they are prepared to do more but that they remain data dependent and are not committed to a specific policy path.And from Goldman Sachs chief economist Jan Hatzius:
The FOMC will almost certainly cut the funds rate on July 31. We expect a 25bp move because virtually all of the signals from the committee point that way. … Growth, employment, and inflation remain close to the Fed’s goals and the data have consistently surprised on the upside since the June FOMC meeting. Meanwhile, financial conditions are already very easy, and our new analysis of the role of credit market sentiment suggests that further easing could raise financial stability concerns down the road. For these reasons, while a September cut remains our baseline, it is far from a done deal.As Hatzius noted the data "have surprised on the upside since the June FOMC meeting". For review are the June FOMC projections.
Q1 real GDP growth was at 3.1% annualized, and Q2 at 2.1%. So far this year, growth has been above the FOMC projections.
GDP projections of Federal Reserve Governors and Reserve Bank presidents | |||
---|---|---|---|
Change in Real GDP1 | 2019 | 2020 | 2021 |
Jun 2019 | 2.0 to 2.2 | 1.8 to 2.0 | 1.8 to 2.0 |
Mar 2019 | 1.9 to 2.2 | 1.8 to 2.0 | 1.7 to 2.0 |
The unemployment rate was at 3.7% in June. The unemployment rate projection for Q2 2019 might be a little high.
Unemployment projections of Federal Reserve Governors and Reserve Bank presidents | |||
---|---|---|---|
Unemployment Rate2 | 2019 | 2020 | 2021 |
Jun 2019 | 3.6 to 3.7 | 3.6 to 3.9 | 3.7 to 4.1 |
Mar 2019 | 3.6 to 3.8 | 3.5 to 3.9 | 3.6 to 4.0 |
The June PCE report will be released tomorrow. As of May 2019, PCE inflation was up 1.5% from May 2018. Recent data suggests PCE inflation will increase a little.
Inflation projections of Federal Reserve Governors and Reserve Bank presidents | |||
---|---|---|---|
PCE Inflation1 | 2019 | 2020 | 2021 |
Jun 2019 | 1.5 to 1.6 | 1.9 to 2.0 | 2.0 to 2.1 |
Mar 2019 | 1.8 to 1.9 | 2.0 to 2.1 | 2.0 to 2.1 |
PCE core inflation was up 1.6% in May year-over-year. Something to check in the report to be released tomorrow.
Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents | |||
---|---|---|---|
Core Inflation1 | 2019 | 2020 | 2021 |
Jun 2019 | 1.7 to 1.8 | 1.9 to 2.0 | 2.0 to 2.1 |
Mar 2019 | 1.9 to 2.0 | 2.0 to 2.1 | 2.0 to 2.1 |