Photo: Morgan Stanley
Morgan Stanley’s Chief U.S. Economist Vincent Reinhart has an excellent 5-minute video explainer of the FOMC minutes on the Morgan Stanley website.In it, Reinhart concludes why he thinks the odds of further quantitative easing are now just 1:3, down from previous odds of 2:3.
Reinhart used to work at the Federal Reserve where he also drafted FOMC minutes. So, he knows what he’s talking about.
“The FOMC minutes make it pretty clear that any Fed decision has to be driven by incoming data, not preemptive,” he said. “Thus we’ve taken out the one-in-three chance of a purchase of insurance.”
According the FOMC minutes, the Fed upped its estimate of aggregate demand, and reduced its risk of aggregate supply.
Despite Reinhart’s downgrade, a 1/3 chance still points to a good possibility of further easing being necessary.
“With our economic forecast, though, we still believe it is possible that signs of slowing growth will accumulate to the point that the Fed provides accommodation,” said Reinhart.