Photo Credit: DonkeyHotey

Comments

• Pretty much a nothing-burger. Few significant changes.  The FOMC has a stronger view of GDP and Labor, and deems the weak global economy to be a reason to wait.
• Despite lower unemployment levels, labor market conditions are still pretty punk. Much of the unemployment rate improvement comes more from discouraged workers, and part-time workers.  Wage growth is weak also.
• Forward inflation expectations have flattened out.
• Has the FOMC seen how low the 30-year T-bond yield is?
• Equities fall and long bonds rise. Commodity prices are flat.  The FOMC says that any future change to policy is contingent on almost everything.
• Don’t know they keep an optimistic view of GDP growth, especially amid falling monetary velocity.
• The FOMC need to chop out more “dead wood” from its statement. Brief communication is clear communication.  If a sentence doesn’t change often, remove it.
• In the past I have said, “When [holding down longer-term rates on the highest-quality debt] doesn’t work, what will they do? I have to imagine that they are wondering whether QE works at all, given the recent rise and fall in long rates.  The Fed is playing with forces bigger than themselves, and it isn’t dawning on them yet.
• The key variables on Fed Policy are capacity utilization, labor market indicators, inflation trends, and inflation expectations. As a result, the FOMC ain’t moving rates up, absent improvement in labor market indicators, much higher inflation, or a US Dollar crisis.\
• We have a congress of doves for 2015 on the FOMC. Things will be boring as far as dissents go.  We need some people in the Fed and in the government who realize that balance sheets matter – for households, corporations, governments, and central banks.  Remove anyone who is a neoclassical economist – they missed the last crisis; they will miss the next one.