Economic Outlook - November 2018

Following each meeting of the Federal Reserve’s Federal Open Market Committee (FOMC), Promontory Interfinancial Network co-founder, former vice-chair of the Fed, and Princeton economist Alan Blinder provides an analysis of the proceedings and implications for future policy and economic activity.

Alan Blinder
Alan Blinder
Vice Chairman and Cofounder, Promontory Interfinancial Network
Professor of Economic and Public Affairs, Princeton University

Sometimes the Federal Open Market Committee has nothing to say—in which case the best course of action is to say nothing. Such was the case last week.

Devoted Fed watchers noticed that instead of saying that business investment has “grown strongly,” which was its characterization in September, the November FOMC statement observed the fact that the “growth of business fixed investment has moderated from its rapid pace earlier in the year.” No controversy there, and it’s an interesting fact, highly relevant to appraising the Trump tax cuts. But given that recent GDP growth has been strong anyway, it’s of limited relevance to monetary policy.

Almost everyone who pays attention to the Fed expects the FOMC to go up another 25 basis points at its December meeting because the November statement continued to use these well-worn words: “The Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2 percent objective over the medium term.” That’s the key sentence to watch for at the next meeting because the consensus for “further gradual increases” may or may not whither as the top end of the federal funds range hits 2.5%. Either way, it will be newsworthy.

In other words, the Fed may have something to say in December that’s worth listening to—unlike in November.