Alan Blinder Bio Photo

Economic Outlook by Alan Blinder

August 2018
Alan S. Blinder

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

As almost-universally expected, the Federal Open Market Committee (FOMC) did not change interest rates at its July 31-August 1 meeting. In fact, it hardly changed any words from its June 13 statement. (Why would it?) The economy now looks “strong” to the FOMC rather than “solid.” The unemployment rate “has stayed low” rather than “has declined.” And measures of inflation “remain near 2 percent” rather than “have moved close to 2 percent.”

You have to be an over-caffeinated day trader to get excited about any of that wordsmithing, and Chairman Powell and his friends were certainly not looking to cause excitement. Anyone who foolishly expected the FOMC to comment on either the trade war or Donald Trump’s brow-beating of the Fed were sorely disappointed. But rest assured that the FOMC has noticed both.

Nothing in Wednesday’s statement should cause anyone to reassess his or her outlook for interest rates. The best guess remains a 25-basis-point hike in September, followed by another one in December, and probably a few more next year—as long as the sailing remains smooth.