It’s not just that the Federal Reserve is arguing about the timing of any interest rate increase. It’s also deeply divided on what facts should count in making that decision. That will make it hard for the Fed to move absent greater clarity on the economy–and that clarity is likely to be a long time coming.
On Wednesday the Federal Reserve will release the minutes from its April meeting–against a background set by today’s release of numbers showing stronger than expected wage and inflation growth.
I was looking for the Federal Reserve to signal three rate increases in 2016 with the first in June. That would have been down from the four increases they had signaled in December. Instead Janet Yellen & Co. pointed toward just two interest rate increases in 2016.
Yesterday, financial markets fell as traders and investors decided that the policy changes–another 10 basis point cut to deposit rates and an increase of 10 billion euros a month in asset purchases–weren’t enough, especially in the face of lower forecasts for inflation and economic growth from the central bank. Today, financial markets seem to have decided that they’re reason to rally.
The core CPI rose by 0.2% for a second month in a row. The 12-month increase in core inflation is now 1.9%,
Consumer inflation in China rose in October at just a 1.3% rate year over year. That was the lowest rate since May. Economists had expected an increase of 1.5%
At 1.9% the annual core CPI inflation rate isn’t all that far below the 2% target that the Fed has set for inflation
Markets in economies where the recent news on growth and inflation has been more negative are up more today.
