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Ahead of Powell's semi-annual Humphrey Hawkins testimony before Congress on Wednesday and Thursday of next week, the Fed has published its Monetary Policy Report, which while very similar to the June Fed meeting, had some seemingly contradictory aspects.
First and foremost in the report - which was published before today's blistering payrolls report - was the section discussing inflation, where to the surprise of many, it was said to reflect "transitory influences", an apparent change from the recently "no longer patient" Fed, which is focusing on downside risks and extending the recovery, to wit:
Consumer - Price - Inflation - Change - Price
“Consumer price inflation, as measured by the 12-month change in the price index for personal consumption expenditures, moved down from a little above the FOMC’s objective of 2 percent in the middle of last year to a rate of 1.5 percent in May. The 12-month measure of inflation that excludes food and energy items (so-called core inflation), which historically has been a better indicator than the overall figure of where inflation will be in the future, was 1.6 percent in May—down from a rate of 2 percent from a year ago. However these year-over-year declines mainly reflect soft readings in the monthly price data earlier this year, which appear to reflect transitory influences. Survey-based measures of longerrun inflation expectations are little changed, while market-based measures of inflation compensation have declined recently to levels close to or below the low levels seen late last year.”
Of course, this hawkish read got a kick today following a blockbuster payroll report which has relieved some pressure to cut, and certainly collapsed the market's expectations of 2 rate cuts in July (even if the job report also showed no acceleration in annual wage gains, signaling that broader price pressures remain contained).
Lack - Inflation - Fed
Despite again noting that lack of inflation may be "transitory", the Fed reiterated...
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