The October Federal Open Market Committee (FOMC) meetings have something of a Rodney Dangerfield “no respect” problem: Since there is no press conference and there are no new rate path projection “dots” for Fed watchers to reverse engineer, October FOMC meetings in recent years are seen as placeholders. The statements released following October meetings tend to reaffirm the message the Fed delivers in the September statement, press conference and meeting minutes.
That said, in the past two years the Fed has used the October statement to provide some firmer guidance on the odds of a December fed funds rate hike. In October 2015, for example, the Fed statement made reference to a factor that would make a hike “at its next meeting” appropriate, while in October 2016 the Fed discussed the reasons it decided to keep rates on hold “for the time being.”
Few new clues in Fed statement
No such language appeared in the October-November 2017 statement released on Wednesday, and by that narrow criterion, one could argue that this latest statement came in on the dovish side. But a broader read rapidly dispels that notion. For example, the FOMC upgraded its assessment of economic activity, saying that it has been rising at “a solid rate,” whereas the September Fed statement said economic activity has been rising “moderately.” The Fed did not change its language on inflation, saying that it is “expected to remain somewhat below 2% in the near term but to stabilize around the committee’s 2% objective over the medium term.” (Recall that the Fed’s preferred measure of inflation is core personal consumption expenditures, or PCE.)
Circle your calendars for 13 December
Bottom line: Wednesday’s statement didn’t roil the waters. In the minutes following its release (to be precise, as of 2:17 pm EDT), the market pricing for a December policy rate hike remained basically flat at around 85%. I believe the Fed policymakers will not be unhappy with this interpretation. The minutes from the September meeting told us that “many” participants thought a rate hike was likely to be “warranted” later this year. And this still seems to be the case.
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Richard Clarida is PIMCO’s global strategic advisor and a frequent contributor to the PIMCO Blog.