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Friday, March 29, 2024

FOMC Statement: Does Change From “Considerable Time” to “Patient” Make Any Difference Whatsoever?

Courtesy of Mish.

Today the Fed made its much awaited FOMC Announcement.

Pundits poring over the statement have generally concluded as does the Financial Times, that Fed Signals Tightening by Mid-2015.

Why?

Because the Fed dropped its forecast that it will keep low interest rates for a “considerable time“.

Now the Fed says it can be “patient” in judging when to start raising rates.

The Financial Times claims the “new language is designed to reassure markets that rate rises are not imminent.

If rate hikes are not imminent, what difference does the change make?

Three Dissents

Hawk: Richard Fisher objected because “improvement in the U.S. economic performance since October has moved forward, further than the majority of the Committee envisions, the date when it will likely be appropriate to increase the federal funds rate”

Dove: Narayana Kocherlakota believes “the Committee’s decision, in the context of ongoing low inflation and falling market-based measures of longer-term inflation expectations, created undue downside risk to the credibility of the 2 percent inflation target.”

Data Dependent: Charles Plosser believes “the statement should not stress the importance of the passage of time as a key element of its forward guidance and, given the improvement in economic conditions, should not emphasize the consistency of the current forward guidance with previous statements.”

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