6 clues about what will happen today straight from the Fed's mouth
REUTERS/Kevin Lamarque
The Federal Reserve's September meeting is finally here.
The Federal Open Market Committee (FOMC) began its two-day meeting on Wednesday and will announce its interest rate decision at 2:00 p.m. ET on Thursday.
The FOMC sets the Fed's monetary policy. It's made up of five reserve bank presidents and seven members of the board of governors including Fed chair Janet Yellen. Ten of them are voters on policy decisions.
In a recent note to clients, Morgan Stanley compiled quotes from recent speeches by FOMC members that outline their thoughts on when the first rate hike in nine years should be.
Emphasis is ours on all the quotes.
Janet Yellen, Fed chair
"Delaying action to tighten monetary policy until employment and inflation are already back to our objectives would risk overheating the economy.
For this reason, if the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate target and begin the process of normalizing monetary policy. To support taking this step, however, I will need to see continued improvement in labor market conditions, and I will need to be reasonably confident that inflation will move back to 2 percent over the medium term."
Source: The Outlook for the Economy, May 22, 2015
Stanley Fischer, Fed vice chair
"Given the apparent stability of inflation expectations, there is good reason to believe that inflation will move higher as the forces holding down inflation dissipate further ...
With inflation low, we can probably remove accommodation at a gradual pace. Yet,because monetary policy influences real activity with a substantial lag, we should not wait until inflation is back to 2% to begin tightening."
Source: US Inflation Developments, August 29, 2015
William Dudley, New York Fed president
"From my perspective, at this moment the decision to begin the normalization process at the September FOMC meeting seems less compelling to me than it was a few weeks ago. But normalization could become more compelling by the time of the meeting as we get additional information on how the U.S. economy is performing and more information on international and financial market developments, all of which are important in shaping the U.S. economic outlook."
August 26, 2015
Source: Morgan Stanley
John Williams, San Francisco Fed president
"My own view is that, assuming that what have appeared to be greater risks to the outlook, that these don’t actually end up seeming to be more convincing signs of global weakness, don’t continue to be a bigger drag on the outlook than I currently anticipate ... then I still would say that it would be reasonable, from my own perspective, to see interest rate increases sometime later this year."
September 4, 2015
Source: Morgan Stanley
Dennis Lockhart, Atlanta Fed president
"I think we are sort of anxious to get going with normalization, but given the events of the last couple of weeks, I think a risk factor has arisen that perhaps didn’t exist at the beginning of the month, and I think it has to be considered an open question whether we move now or we wait a little while ... I’m of the view that the chances of a serious policy error are very low ... So to me, a meeting here or there is not going to be a life or death kind of decision.
The most recent data I saw was about a 50% probability—so it’s 50-50 around the [September] meeting—that seems to me to be, given the current circumstances, a reasonable assessment of the situation."
August 28, 2015
Source: Morgan Stanley
Jeffrey Lacker, Richmond Fed president
"The case for raising interest rates ... has actually been true for some time ... [b]ut I’ve been willing to wait so far this year ... for confirmation that the factors holding down real growth and inflation late last year and early this year were transitory. It is now clear that those factors, which included harsh winter weather, the strengthening dollar, and the steep decline in energy prices, have dissipated. It was not unreasonable to seek more definitive evidence that these impediments to growth and price stability had passed, but that question has now been settled."
September 4, 2015
Source: Morgan Stanley
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