Does a 4-minute summary sound ambitious? Stay with me and find out.
The Federal Reserve issues the "FOMC Statement". The latest one was today, but the previous one was 06/15/2017. Despite appearing complex, there is very little that changes from month to month. The document serves as a form letter. Variables change each time. There are a few new sentences. This is a quick process.
Month moves from May to June.
The following sentences open the statements:
"… indicates that the labor market strengthened and that economic activity has been expanding at a moderate rate. Job gains were strong in June following weak growth in May. On balance, payrolls and other labor market indicators point to some increase in labor utilization in recent months. Household spending has been growing strongly but business fixed investment has been soft."
This is the July report. Jobs increased. More data sources support the claim. Household spending is up. Corporate capital expenditures remain weak.
No surprise. More jobs has been a trend recently. Increasing wages at low-income jobs support higher household spending. Several employers raised their minimum wages over the last year.
New sentence added:
"Near-term risks to the economic outlook have diminished."
Brexit is no longer concerning the Federal Reserve or investors.
Was there a change in real major risk factors? This could have been: "The S&P 500 hit new highs."
There were no changes to paragraphs 3, 4, or 5.
New sentence added:
" Voting against the action was Esther L. George, who preferred at this meeting to raise the target range for the federal funds rate to 1/2 to 3/4 percent."
Esther L. George voted to keep rates at the same level in the prior meeting. This time she voted to raise them. She was the only one voting in favor of higher rates. Rates remain at the prior level.
I am not a fan of raising rates because I do not believe it will help the economy. On the other hand, the problems in the economy are not suited to the Federal Reserve. Monetary policy does not solve low corporate expenditures. Profitable investment opportunities would be the cure. The Federal Reserve does not control those.
The Federal Reserve minutes were largely non-eventful. There are more jobs now and the wages are slightly higher. People earning more money are spending more money. Corporations are still not spending aggressively on capital expenditures. The Federal Reserve is no longer concerned about Brexit. One member voted to raise rates. Rates remain at prior level of 25BP to 50BP.
The original is on the Federal Reserve website.
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