US Economics Weekly "FOMC: Decision time" Pingle

Research evidence excerpt

US Economics Weekly "FOMC: Decision time" Pingle

hanged and

revisit the matter in September. Overall, we would expect three dissents as a base case.

Thus, we expect the FOMC meeting statement to begin with, "The Federal Open Market We think the basic structure of the

Committee approved the following statement for release by a 9 - 3 vote", and the FOMC statement remains the same as

second paragraph to remain unchanged too. "The Committee decided to maintain the in June.

target range for the federal funds rate at 3-1/2 to 3-3/4 percent, in support of the

Federal Reserve's dual mandate. The Committee reaffirmed its policy of maintaining

ample reserves in the banking system." After listening to Chairman Warsh discuss the

"two" tools of interest rates and the balance sheet, we think the new Chairman wants

the balance sheet policy, the ample reserves framework, approved at each meeting just

like interest rate policy. We think the basic structure of the statement rolled out in June

remains intact in July.

In contrast, we expect the third paragraph is changed to acknowledge the June decline We expect the statement to

in the unemployment rate. How is unclear. That is partly because the choice of language acknowledge the June decline in the

in the June FOMC statement is somewhat awkward: "Economic activity is expanding at unemployment rate.

a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle

East. Productivity growth and capital investment are strong. Job gains have kept pace

with the workforce, and the unemployment rate has changed little." The first sentence

can stay as is, but the second sentence we think will reflect the unemployment rate

moving down in June. However, the problem is that "job gains have exceeded the pace