Further moves will be dictated by the tone of the data leading up to the next meetings. This is not to say that the fed funds rate couldn't go to 5 percent but there would need to be more underlying strength in the economy to drive it there. |
Growth should decelerate through the final three quarters of the year and once that happens inflation pressures we've seen will begin to ease. That should lead to a more benign tightening cycle, which won't be threatening to the financial markets, |
I was surprised by the employment index, which was a pretty large monthly increase. The prices paid component rose probably due to higher energy prices. |
It'll boost first-quarter GDP at a robust pace given the sluggishness of the fourth quarter. |
It's not friendly for the Fed at all. This boosts the chance of a March rate increase; it should cement 4.75 percent. |
Oil is a double-edged sword. From one aspect, it lifts overall inflation but from the other side of the same coin it places a constraint on growth. So if oil prices remain high, the implications for the Fed get a little dicey, |
Overall there are not a lot of surprises here. |
The Fed are saying that there is no evidence yet that underlying inflation is moving higher. |
The historical pattern is for shocks of this nature to initially be absorbed roughly equally between lower savings and lower purchases for other goods and services. |
There will be some clear near-term inflation effects because of higher energy prices. |
We'll see continued downward pressure on unit labor costs in the first quarter. I think it's favorable on the inflation front. |
What struck me as a little out of character was the Fed's characterization of inflation staying elevated, ... What was here was a clear absence of any sort of signal that the Fed is getting close to the end of tightening and the market seems to be reacting a bit negatively to that. |
You are getting the rally in Treasuries because the minutes imply a little less tightening than what the market had anticipated. |