Fed Policy

Summary: If we focus on the domestic labor that contributes to "Core Services Ex Housing PCE" output, we see that wage growth is no longer looking so hot. Labor cost pressures on "Core Services Ex Housing" PCE inflation are diminishing. Within the Fed's preferred

A wealth of Fedspeak this week has substantially clarified whose dots were whose on the most recent SEP. Goolsbee’s dovish speech strongly suggests the lone 4.875 dot was his, while Waller makes the case for further hikes. Bostic and Harker strongly implied their previous dots landed at 5.

Still too early to say about June dots, but this week’s Fedspeak suggests the Fed sees the turmoil in the wake of SVB as unlikely to widen, but of possible sectoral relevance as a shock to small businesses, as we noted last week. Bullard is worried about OPEC’s

We think it’s too early to make any judgments about June dots but it seems clearer that Susan Collins’ priors remain geared towards further tightening, while Neel Kashkari consistently sounded more cautious about macroeconomic implications from banking turmoil.

While there are prescriptive upshots to this piece, this piece is meant to get at the core descriptive points about how monetary policy works. There is plenty of room to debate optimal policy and optimal macroeconomic objectives, but we should first be clear about what the Fed's approach

There's a great deal of literature on the connection between tighter credit conditions, economic activity, hiring, and inflation. Very large body of literature. The question is, how significant will this credit tightening be and how sustainable it will be. Jerome Powell, March 22, 2023 FOMC Press Conference In