More than ever, economists are parsing the Fed’s words for any clues as to what it’s next move will be.Many believe more easy monetary policy is coming. But no one know for sure what it’ll look like and when it will come.
In its latest FOMC minutes, the Fed revealed its latest clue.
Unfortunately, half of it was a bit ambiguous.
From JP Morgan’s Michael Feroli (emphasis ours):
“The minutes to the July 31-August 1 FOMC meeting were quite dovish and indicated that the Committee was already quite close to acting at the last policy meeting. The crucial phrase was “Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.” The Federal Reserve Bulletin notes the order of quantitative descriptions is: all, most, many, several, few, one, so “many” is probably close enough to a majority to decide the fate of policy. Unfortunately there is no Rosetta Stone for the phrase “substantial and sustainable strengthening,” but we would judge that what we have seen in the three weeks since the meeting is not enough to cross this ambitious threshold. In light of the tone of these minutes, and even with the improved data and financial conditions since last meeting, we believe it is quite likely the Fed will undertake some action at the next meeting in mid-September.”
So, Feroli thinks the U.S. economy hasn’t experienced that “substantial and sustainable strengthening.” We’ll find out if he’s right next month.