Alan Blinder Bio Photo

Economic Outlook by Alan Blinder

May 2018
Alan S. Blinder

Vice Chairman and Co-Founder, Promontory Interfinancial Network
Professor of Economics and Public Affairs, Princeton University

You were probably expecting a “ho-hum” statement from the Federal Open Market Committee’s (FOMC) meeting on May 1-2. (If you weren’t, you should have been.) And that’s just what you got.

Interest rates were not changed, of course. No one expected that. And the wording of the statement didn’t change much from the March 21 statement, either. Again, that was no surprise. Aside from the fact that the economy has at last achieved the Fed’s 2% inflation goal, not much has changed over the last six weeks.

If you are scrounging for “news” in the May 2 statement, it’s probably that the FOMC tilted ever so slightly in the dovish direction. The Committee re-emphasized that its 2% inflation target is “symmetric”—meaning that it is just as distressed with 2.5% as with 1.5%—by adding that adjective for a second time (as opposed to just once in the March statement). And after repeating the ritual words that the “risks to the economic outlook appear roughly balanced,” it omitted the qualifying phrase it has been using up until now: “but the Committee is monitoring inflation developments closely.” Interesting. But don’t think the Committee is no longer monitoring inflation developments!

All eyes now turn to the June FOMC meeting, of course, where there is a strong consensus in the markets that the Fed will hike rates another 25 basis points. Sounds right to me.