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US mixed manufacturing messages clouds the outlook ahead of Powell
We have had some surprisingly soft numbers out of the US this morning. The ISM manufacturing survey fell to 47.7 in February from 49.1 (consensus 49.5), contradicting the story told by the bulk of the regional manufacturing reports. That means we have had 16 consecutive months of sub-50 prints, which is the dividing line between expansion and contraction. The details show production contracted at its fastest rate since last July while new orders dropped back into contraction territory and the employment component dropped to 45.9, indicating some meaningful weakness – it has only been lower once (July last year) ... (full story)
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The Federal Open Market Committee (FOMC) is firmly committed to fulfilling its statutory mandate from the Congress of promoting maximum employment, stable prices, and moderate long-term interest rates. The Committee seeks to explain its monetary policy decisions to the public as clearly as possible. Such clarity facilitates well-informed decisionmaking by households and businesses, reduces economic and financial uncertainty, increases the effectiveness of monetary policy, and enhances transparency and accountability, which are essential in a democratic society. Employment, inflation, and long-term interest rates fluctuate over time in response to economic and financial disturbances. Monetary policy plays an important role in stabilizing the economy in response to these disturbances. The Committee’s primary means of adjusting the stance of monetary policy is through changes in the target range for the federal funds rate. The Committee judges that the level of the federal funds rate consistent with maximum employment and price stability over the longer run has declined relative to its historical average. Therefore, the federal funds rate is likely to be constrained by its effective lower bound more frequently than in the past. Owing in part to the proximity of interest rates to the effective lower bound, the Committee judges that downward risks to employment and inflation have increased. The Committee is prepared to use its full range of tools to achieve its maximum employment and price stability goals. The maximum level of employment is a broad-based and inclusive goal that is not directly measurable and changes over time owing largely to nonmonetary factors that affect the structure and dynamics of the labor market. Consequently, it would not be appropriate to specify a fixed goal for employment; rather, the Committee’s policy decisions must be informed by assessments of the shortfalls of employment from its maximum level, recognizing that such assessments are necessarily uncertain and subject to revision. The Committee considers a wide range of indicators in making these assessments. The inflation rate over the longer run is primarily determined by monetary policy, and hence the Committee has the ability to specify a longer-run goal for inflation. The Committee reaffirms its judgment that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve’s statutory mandate. The Committee judges that longer-term inflation expectations that are well anchored at 2 percent foster price stability and moderate long-term interest rates and enhance the Committee’s ability to promote maximum employment in the face of post: Fed: US Inflation Has Slowed Notably, Remains Elevated - MonPol Report Fed: 6-Month Core PCE Rose at Annual 2.5% Rate; Inflation Measured Over Relatively Short Periods May Exaggerate Idiosyncratic, Temporary Factors post: FED: IT IS NOT APPROPRIATE TO REDUCE TARGET RANGE UNTIL WE HAVE GREATER CONFIDENCE INFLATION MOVING SUSTAINABLY TOWARD 2%. post: FED: WAGE GAINS SLOWED IN 2023, BUT REMAIN ABOVE PACE CONSISTENT WITH 2% INFLATION. post: FED: THE LABOR MARKET HAS REMAINED RELATIVELY TIGHT, DEMAND HAS EASED, SUPPLY HAS TRENDED HIGHER.
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- Posted: Mar 1, 2024 11:51am
- Submitted by:Category: Fundamental AnalysisComments: 0 / Views: 3,220
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