Tapering Toward a Pause

For some Federal Open Market Committee (FOMC) meetings, the result seems obvious ahead of time to just about everyone. This was one of them. When the result is obvious, the market shouldn’t react much because there’s little room for a surprise to push prices around. But this time, the market did react. Why? It’s simple: The FOMC is splintering into factions, and that makes the outcomes from future meetings much less obvious.

Fed Preview: Talk Isn’t Cheap

The old saying is that “talk is cheap.” It certainly isn’t if you’re a central banker. Investors hang on a central banker’s every word. Whether the Federal Reserve (Fed) hikes by 75 basis points (bps; 100 bps equal 1.00%) or 50 bps is probably less relevant than what Fed officials say with their Summary of Economic Projections (their guesses about what they’ll do in the future and how the economy may evolve).

May 4 FOMC Meeting: 50-bp Rate Hike Now, More On the Table

On Wednesday, the Federal Open Market Committee (FOMC) raised the federal funds rate by 50 basis points (bps; 100 bps equal 1.00%) to a new range of 0.75%‒1.00%. This was widely expected by the market, and the vote was 10-0.

Fed Balance Sheet: You Can’t Get There From Here

On May 4, the Federal Open Market Committee is expected to announce a 50-basis-point (bp; 100 bps equal 1.00%)—0.50%—increase in its target for the federal funds rate. It’s also likely to announce it will start shrinking its balance sheet. What will the balance-sheet reduction look like, and what might it mean?

Walking the tightrope

The Federal Reserve (Fed) and the money markets seem to agree that it’s time for the Fed to shore up its inflation-fighting credentials. As economic data continued to come in hot over the past few months — showing a tight labor market and inflation not seen for generations — the prospect of accommodation removal in its various forms moved from a distant event to one likely to begin soon. The Fed has signaled it will raise rates at its March meeting; the main question over the past month or so has been whether the first increase would be 25 basis points (bps; 100 bps equal 1.00%) or 50 bps.