Macroeconomics – Page 5 – The Aleph Blog

On the Decline of Lifestyle Employment

Posted on 15 October 201616 October 2016 by David Merkel

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Industries come and industries go. Jobs come and go, and they morph. ?Perhaps we should take heart that politicians don’t change. ?Most still think that certain types of jobs need to be preserved and protected. ?Also, politics doesn’t ever seem to have productivity improvements, such that the same things could get done (or not) with fewer people.

Looking at the history of the past 200 years, and the?jobs that existed then and exist now, you would conclude that less than 10% of people working in the US today occupy jobs remotely similar to what was done 200 years ago. ?(I exclude homemakers who do valuable work for their households that is blissfully untaxed.)

There are places that had prosperity for a time because an industry grew large, and then that industry went into decline, or at least, increased labor productivity reduced employment in that industry. ?I’ll toss out a few:

Agriculture generally
Coal mining
Iron ore mining
Steel
Auto production
Construction
Newspapers
Magazines
Bookstores
Textiles
Telephones
Apparel
Family farms
Many industrial jobs

The last two are notable for the passion that they generate. ?Politicians will say that family farms have to be protected and that we need more good industrial jobs. ?Both are hopeless causes. ?Farms benefit from scale in general, though small farms can do well if they have a specialty where?people are willing to pay up to gain the quality of the product.

Industrial employment is going down globally. ?The application of information technology to industrial processes allows as much or more to be made, while hiring fewer workers.

The politicians may as well beg that we could stop time or reverse it. ?Absent some astounding catastrophe it is hard to see how productivity would decline such that more workers ?are needed in industrial jobs. ?”Ned Ludd” lost that war over 200 years ago.

Politicians might be able to shift where jobs are located, but not the total amount that gets produced or the number hired globally. ?Anytime you hear them say that they will increase the quantity, quality or pay of jobs, it is best to ignore the politicians. ?They are?promising something that they can’t control. ?The same is true of central bankers; if they can do anything about the number of jobs, it is highly transitory, as policy loosens and tightens; jobs flow and ebb.

Anyone looking seriously over the last 200 years should conclude that in this modern world with the extended division of labor that jobs will continue to morph, appear, and disappear. ?The internet has led to the disappearance and creation of many jobs, and I don’t think that that trend is complete yet.

My best advice to you is this: learn, grow, be flexible, and be willing to work in ways that you never imagined. ?The clock will not be turned back on technology, which is the main factor affecting employment. ?You must be your own defender, because the factors affecting employment are bigger than that which governments can control. ?Finally, as an aside, don’t trust the politicians (from any party) who say they will improve your economic prospects. ?Aside from reducing what the government does, they haven’t succeeded in the past; they will not succeed in the present.

Thinking About Monetary Policy: A Counterfactual

Posted on 8 October 20169 October 2016 by David Merkel

Photo Credit: Daniel Mennerich || A bridge described in fiction to bridge me to the counterfactual argument of this post

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I received an email from a longtime reader:

David, here is a (possibly useless) thought experiment.

In 2005, PIMCO’s Paul McCulley was begging Ben Bernanke to halt the on- going quarter-point raises in the Fed Funds rate at 3.5 percent. I forget his exact reasoning, but he clearly thought that the financial markets couldnot accommodate short-term rates above 3.5 percent without substantial disruptions.

Suppose that Bernanke had listened to McCulley and capped the Fed Funds rate at 3.5 percent until it was clear how the markets would fare at that level. Would that alone have been sufficient to postpone or even avert the housing crisis? Or would it have made the crash even worse?

According to FRED, the Funds rate reached 3.5 percent in August 2005, and as we know housing prices nationally peaked about one year later, just as the Funds rate was topping out at 5.25 percent. Question is, did the additional 1.75 percent of increases serve to tip the housing market into decline, or was the collapse inevitable with or without the last seven quarter-point raises?

Any thoughts?

Here was my response:

I proposed the same thing at RealMoney, except I think I said 4%.? My idea was to stop at a yield curve with a modestly positive slope.? It might have postponed the crisis, and maaaaybe allowed banks and GSEs to slowly eat up all of the bad loan underwriting.

I had Googlebots tracking housing activity daily, and August 2015 was when sales activity peaked.? I announced it tentatively at RealMoney, and confirmed it two months later.? From data I was tracking, housing prices flatlined and started heading down in 2006.? The damage was probably done by 2005 — maybe the right level for Fed funds would have been 3%.

The trouble is, hedge funds and other entities were taking risk every which way, and a mindset had overwhelmed the markets such that we had the correlation crisis in May 2005, and other bits of bizarre behavior.? Things would have blown up eventually.? Speculative frenzy rarely cools down without the bear phase of the credit cycle showing up.

So, much as it would have been worth a try, it probably wouldn’t have worked.? The housing stock was already overvalued and overleveraged.? But it might have taken longer to pop, and it might not have been as severe.

But now for the fun question.? Is the Fed trying to do something like that now?? Are they so afraid of popping any sort of asset bubble that they have to be extra ginger in raising rates?? It seems any market “burp” takes rate rises off the table for a few months.

I don’t know.? I do know that the FOMC has only 1% of tightening to play with before the yield curve gets flat.? Also, obvious speculation is limited right now.? There is a lot that is overvalued, but there is no frenzy… unless you want to call nonfinancial corporation and government borrowing a frenzy.

Thanks for writing.

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The FOMC is Afraid of its own Shadow

If I were the Fed, I would end the useless jabbering that they do. ?I would also end the quarterly forecasts and press conference. I would also end publishing the statement and the minutes, and let people read the transcripts five years later. We would go back to the pre-Greenspan years, when monetary policy was managed better. ? Before I did that I would say:

The Fed has three responsibilities: controlling inflation, promoting full employment, and regulating the solvency of the banking system. ?We are not responsible for the health and well-being of financial markets. ?The ‘Greenspan Put’ is ended.

We will act to limit speculation within the banks, such that market volatility will have minimal impact on them. ?We want our pursuit of limited inflation and full employment to not be hindered by looking over our shoulder at the boogeyman that could affect the banking system. ?To that end, please realize that we will not care if significant entities lose money, including countries that may get whipped around by our pursuit of monetary policy in a way that benefits the American people.

We are not here as guarantors of prosperity for speculators. ?Really, we’re not here to guarantee anything except pursue a stable-ish price level, and to the weak extent that monetary policy can do so, aid full employment.

We hope you understand this. ?We do not intend to use our “lender of last resort” authority again, and will manage bank solvency in a way to avoid this. ?We may get called ‘spoilsports’ by the banks that we regulate, but in the end we are best served as a nation if solvency concerns dominate over the profitability of the banking industry.

As it is, the present FOMC fears acting because it might derail the recovery or spark a bear market in risky assets. ?Going beyond the mandate of the Fed has led to bad results in the past. ?It will continue to do so in the future.

The best way for the Fed to maintain its independence is to act independently and responsibly. ?Don’t listen to outside influences, particularly when hard things need to be done. ?Be the adult in the room, and tell the children that the medicine that you give them is for their good. ?Recessions are good, because they clear away bad uses of capital from the ecosystem, and make room for new more productive ideas to use the capital instead.

As it is, the Fed is afraid of its own shadow, and will not take any hard actions. ?That will either end with inflation, or an asset bubble that eventually affects the banks. ?A central bank like that does not follow its mandate does not deserve its independence. ?So Fed, if you won’t act for our long-term good, will you act to preserve your existence in your?present form?

Redacted Version of the September 2016 FOMC Statement

Posted on 21 September 2016 by David Merkel

Comments

The FOMC tilts closer to tightening, though they changed their risk statement to neutral.
Interesting to see such a large dissent. That is a relatively rare occurrence.
Policy continues to stall, as the economy muddles along.
But policy should be tighter. Savers deserve returns, and that would be good for the economy.
The changes for the FOMC?s view are that GDP and labor indicators are stronger. The FOMC has groupthink and confirmation bias, and thus interpret noise as signal.
Equities and bonds rise. Commodity prices rise and the dollar falls.? Everything is a little looser.
The FOMC says that any future change to policy is contingent on almost everything.
The key variables on Fed Policy are capacity utilization, labor market indicators, inflation trends, and inflation expectations. As a result, the FOMC ain?t moving rates up much, absent much higher inflation, or a US Dollar crisis.

Redacted Version of the July 2016 FOMC Statement

Posted on 27 July 2016 by David Merkel

Comments

This statement was a nothing-burger.
Policy continues to stall, as the economy muddles along.
But policy should be tighter. Savers deserve returns, and that would be good for the economy.
The changes for the FOMC?s view are that labor indicators are stronger, and GDP and household spending are weaker.
Equities and bonds rise a little. Commodity prices rise and the dollar falls.? Everything is a little looser.
The FOMC says that any future change to policy is contingent on almost everything.
The key variables on Fed Policy are capacity utilization, labor market indicators, inflation trends, and inflation expectations. As a result, the FOMC ain?t moving rates up much, absent much higher inflation, or a US Dollar crisis.

In Human Affairs “Never Say Never”

Posted on 5 July 2016 by David Merkel

Picture Credit Bloomberg — Picture Credit: Bloomberg

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Rates can go lower from here. ?For as long as I can remember, I have been told by many experts that rates can’t go lower, or, that they must go up — there is no way they can go lower. ?I have argued with that idea, as has Hoisington (Lacy Hunt), Gary Shilling and a few others.

Note also that the Fed and most central banks have been on the wrong side of this as well. ?They keep saying that inflation will come, economic activity will pick up,?and that interest rates will rise.

The Fed keeps saying that they will tighten policy. ?I’ll tell you this — with only 0.82% between the yields on 10- and 2-year Treasuries, the Fed is not tightening.

WIth debt levels as high as they are (both government and private), trying to influence economic activity though interest rates is a dumb idea. ?Incenting borrowers to borrow more is difficult, aside from the government — and they rarely do anything with the money that helps produce opportunities for greater economic activity.

We would be better off without “policymakers” trying to “stimulate” the economy, “manage” it, “stabilize” it, etc. ?(But where is the political will to change things — the populace wants easy prosperity, and who is there to tell them to accept a rough world where work and competition is tough, and there is no “Big Daddy” to make life easy? ?The people are the problem. ?The politicians are only a symptom.)

There is one thing that could change this, but it would lay bare the intellectual and moral bankruptcy of what policymakers have been trying to do, which is try to maintain the real value of debt claims while still trying to “stimulate” the economy. ?They could burn away the value of debt claims through an inflation greater than that of the 1970s.

So far, they aren’t willing to do that. ?But their existing policies will prolong the stagnation.

And as such, rates can fall further — with a lot of noise/variation around it.

Brexit Boogeyman Bellows “Boo!”

Posted on 24 June 2016 by David Merkel

Picture Credit: Peanuts Reloaded || Perhaps today Brexit; Monday an exit from Italy or Spain; [then] Europe dismantles — Picture Credit: Peanuts Reloaded || Roughly: “Perhaps today Brexit;?Monday an exit from Italy or Spain; [then]?Europe dismantles”

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At a time like this, when the Brexit Boogeyman goes “Boo!” it’s time to take stock of the situation amid panic.

Though the UK will face some political unrest as the Prime Minister resigns, and article 50 is likely but not certainly invoked, the nature of political discourse hasn’t shifted in full. ?Though an important question, it is only one question, and more things will remain stable than change.

At least that is most likely. ?If you think of “real options” theory, you could say, “Okay, a door opened today that was previously locked. ?What new doors beyond that one could be opened?” ?Other countries could leave the EU and/or?Eurozone [EZ]. ?The EU/EZ could dissolve. ?The odds of other countries leaving isn’t that high. ?For the EU or EZ to dissolve would take a lot of doing, and the odds of that happening is very low, though higher than the odds yesterday.

As I said a week ago:

Governments are smaller than markets; markets are smaller than cultures.

What I am saying is that almost everything affecting the needs of people will get done when there is sufficient freedom. ?If Brexit occurs, the UK will negotiate some agreement that is mutually beneficial to the UK and the EU, and most things will go on as they do today. ?Even with a subpar agreement,?perfidious Albion is very effective at getting what they need completed. ?This is especially true of their very effective and creative financial sector in the City of London without which most effective international ~~secrecy, taxation avoidance and regulatory avoidance~~ business could not be done.

Whatever happens, it will happen slowly. ?Leaving a complex multinational group like the EU takes two years at least. ?How it all works out in detail is not predictable.

I can say that human systems tend toward stability. ?People act to preserve the things that they like. ?Only under severe conditions does that cease to be true, and even then typically only for short periods of time.

I can also say something a little more controversial. ?Wealth, assets, and money [WAM] act like they are alive and have more votes than people do under most conditions. ?Why am I saying this?

Governments come in, and go out, but for the most part, the same things get done. ?Those thinking that radical change will come are usually deeply disappointed. ?WAM tend to maintain the status quo, not because their owners ~~bribe politicians and suborn regulators~~ pay political action contributions, ?but because people want the streams of goods and services that help make WAM valuable. ?Only a genuine crisis at least as large as?the Great Depression or the Civil War can create truly radical change that reshapes the basic desires of most of the people in a nation.

Capitalist democracies that respect the rule of law (e.g., the government is also governed by?a higher law) are usually pretty stable; systems that don’t have significant capitalism or democracy may last a couple generations, but tend to fall apart.

All that said, there is significant economic pressure to do two things after the Brexit:

Rethink the single currency and common laws
Maintain a free-ish trade zone in goods and services

The Eurozone does not allow for the necessary economic adjustments across nations in a fiat?monetary system. ?Nations need their own currencies, central banks, etc. ?They also need to govern themselves via their local culture, not someplace far away with misguided idealists who think they know what’s best for all.

Free-ish trade maintains most of what is needed?for human needs. ?The European Union is a political construct meant to prevent war from ever recurring in Europe. ?The best way to do that is through trade. ?Severe wars rare start between nations that rely on each other and interact through commerce.

My view is that ten years from now, the goods and services that people want will get delivered, regardless of the governmental structures in Europe. ?I will invest accordingly.

Practical Implications

Things will be rocky in the short run, and there will be more bumps along the road as the Brexit negotiations go on. ?I will be resisting panic and euphoria in modest ways. ?This isn’t the sum total of my strategies, but I expect that profitable business will continue, and that people and nations will pursue generally intelligent long-term self-interest as events unfold.

When I say modest, I tweak my portfolios at the edges. ?Brexit does not comprise more than 5% of what I would do with assets. ?As with any investment idea, spread your bets, diversify, don’t bet the farm.

And, I would say the same even to governments — if you don’t have contingency plans for the possibility of the EU shrinking or even disappearing, you are not truly prepared for all contingencies. ?As Warren Buffett once said (something like) “We’re paid to think about the things that ‘can’t happen.'”

In closing, many thought that Brexit could not happen. ?Now, what else “can’t happen?” 😉

The Collapse of FOMC Expectations

Posted on 17 June 201617 June 2016 by David Merkel

When do you admit that you are wrong? ?Do you do it publicly? ?Do you hide it?

Do you hide it plain sight?

When I look at the graph for Fed funds for 2017 and later, I think the FOMC is admitting that they were wrong for a long time, and now hide that in plain sight.

They don’t admit that they were wrong. ?They don’t admit that the economy has proven to be a lot weaker than they ever expected, and that they now expect that to persist for a while.

That’s what the graphs for Fed funds and GDP say.

But what does the FOMC say in its statement? ?It expresses confidence in future GDP robust growth, even though their expectations have collapsed to 2% real growth as far as they care to opine.

Look at the above graph, and see how it has all converged to 2%.

PCE Inflation? They assume it will be 2% before the year starts, and then they adapt to incoming data.

There’s no model here, just a disappointed ideology that says they wish to ?produce a 2% PCE inflation rate, dubious as that goal is.

The only thing more dubious there is their ability to achieve their ideology.

Remember after the financial crisis? There were those who said unemployment would never return to 5% — that the natural rate of unemployment was permanently higher.

I may have been among them.

Well, now the FOMC has a new consensus. ?Unemployment below 5%?as far as they care to opine.

When I look at these graphs, particularly the ones for Fed funds and GDP growth, I see a paradigm shift where Bayesian priors have been dragged kicking and screaming by the data to No Man’s Land.

Grudgingly they acknowledge the data in the graphs, but they don’t have a theory to go along with it, so their statements and minutes sound the same.

Nothing is changed. ?Soon our policies will restore robust real GDP growth, produce inflation and then we will tighten policy and restore normalcy.

Well, that’s what their minutes and statements say.

But who are you going to believe? ?The FOMC and their words, or your lying eyes looking at their graphs?

PS — modified to reflect Bullard’s lack of a vote on long-term Fed funds rate.

Redacted Version of the June 2016 FOMC Statement

Posted on 15 June 2016 by David Merkel

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Comments

The FOMC meets too frequently. Often the economic signals at one meeting get reversed at the next meeting, as was true this time.? Rather than hyper-interpreting every wiggle, maybe the FOMC should meet every six months, with the proviso that the chairman could call an interim meeting if the situation demanded it.
That this is true regarding economic aggregates has been known since the ?50s. For a variety of reasons, it is difficult to distinguish signal from noise over periods of less than a year.
Then again, maybe the FOMC meets to make it look like they are doing something. 😉
This statement was a nothing-burger.
Policy continues to stall, as the economy muddles along.
But policy should be tighter. Savers deserve returns, and that would be good for the economy.
The changes for the FOMC?s view are that labor indicators are weaker, and GDP and household spending are stronger.
Equities fall and bonds rise a little. Commodity prices rise and the dollar falls.
The FOMC says that any future change to policy is contingent on almost everything.
The key variables on Fed Policy are capacity utilization, labor market indicators, inflation trends, and inflation expectations. As a result, the FOMC ain?t moving rates up much, absent much higher inflation, or a US Dollar crisis.

Brexit Boogeyman

Posted on 14 June 2016 by David Merkel

Photo Credit: Gwydion M Williams?|| They do the Hokey Pokey 😉

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Investors need things to scare them, or they don’t have a normal life. ?This is kind of like the bachelor uncle who tells little?nieces and nephews about scary things that lurk under their beds, and only come out at night for mischief and mayhem. ?(Then the parents pick up the pieces later, when they wonder why William or Elizabeth no longer sleep well at night.)

That’s the way I feel about US & international market reactions to the possibility of UK/Britain exiting the EU, otherwise called “Brexit.” ?It’s overblown. ?Quoting from an older article of mine:

Governments are smaller than markets; markets are smaller than cultures.

What I am saying is that almost everything affecting the needs of people will get done when there is sufficient freedom. ?If Brexit occurs, the UK will negotiate some agreement that is mutually beneficial to the UK and the EU, and most things will go on as they do today. ?Even with a subpar agreement, perfidious Albion is very effective at getting what they need completed. ?This is especially true of their very effective and creative financial sector in the City of London without which most effective international ~~secrecy, taxation avoidance and regulatory avoidance~~ business could not be done.

There are other reasons not to worry as well if you live outside the UK. ?The biggest reason is that the UK is only a small part of the global economy, and the economic effects on non-EU trade and finance are smaller still. ?And unlike the idea was small but “contained,” in this case, large second order effects aren’t there. ?Yes, someday other nations may wise up and decide to leave the EU, but?no major countries are likely to do that over the next decade, absent some crisis. ?(Crises in the EU? Those aren’t allowed to happen; ask any Eurocrat, they’ll tell ya.)

A second reason not to worry is that leaving the EU ends a second level of regulation of UK economic activity. ?This will enable better growth in the longer term. ?Are there things that the UK will lose? ?Sure, they won’t have as good of a trade deal with the EU, but they will have the ability to try to craft better deals elsewhere, like a Transatlantic Free Trade Area.

The Economist had a decent summary of the good and bad for the UK over leaving the EU. ?Here’s their summary table:

Looking over this, the UK already depends less on the EU than most member states, making the exit less of a big deal for the UK and the EU.

My view is this: leaving the EU won’t be a big thing in the long run for the UK. ?In the short-run, there will be some uncertainty and volatility as things get worked out. ?For the rest of the world, it will be a big fat zero, so ignore this, and focus on something with more meaning, like bizarre monetary policy, and the twisting effects it is having on our world, or the global entitlements crisis — too many people retiring, too few to support them, especially medically.

So, be willing to take some additional risk if people mindlessly panic if the UK/Britain exits the EU.

Saudi Arabia: Reading Tea Leaves

Posted on 4 June 20165 June 2016 by David Merkel

Photo Credit: Bahrain Ministry of Foreign Affairs

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Let me mention four?posts that I did recently on energy issues:

There were four?main ideas that came out of those articles:

Saudi Arabia would allow the price of crude oil to fall to hurt competitors/rivals, particularly Iran.
The price of crude oil would stay near $50/barrel.
Lots of overlevered companies dependent on a high price for crude oil would go bankrupt.
But?bankruptcy would happen to fewer, and more slowly, because of all the private equity wanting to buy distressed assets.

All that said, my view has changed a little recently. ?I could be wrong, but I think that the ceiling price for crude oil may be $70/barrel for a few years, with the average remaining at $50. ?I believe this because I think the Saudis are more desperate for cash than most believe.

Here’s my reasoning:

First, you have them selling off a?5%?interest in Saudi Aramco. ?When you need?money, there is a tendency to sell high quality easily saleable assets, because they will sell for a high price, and with little fuss. ?Admittedly, they aren’t rushing to do it, which weakens my point. ?My view is that you would sell off lesser things that aren’t core, rather than complicate life by selling off a portion of a top quality asset.
Second, they are seeking loans, and considering selling bonds.
Third, they are considering decreasing the subsidies that they give to their people. ?I think this will be very difficult to achieve politically.
Fourth, when the amount of Saudi holdings of US Treasury bonds was announced, it was lower than many expected, at $120+ billion, which only covers a little more than a year of their budget deficits, which was $98 billion last year.
Fifth, and most speculatively, I wonder if many of the US Treasury holdings have been pledged to cover other debts. ?No proof here, but it’s not uncommon to use highly liquid assets as collateral for privately contracted debts. ?That may explain the musing by some that there had to be more US Treasuries ?there… but where are they?

What this implies to me is that Saudi Arabia is now little different than most of their associates in OPEC. ?Their financial situation is tight enough that they must pump crude oil without respect?to the strategy of holding crude oil off the markets to get better prices. ?It’s not just punishing US shale oil production and Iranian crude production — the Saudis need the money.

If the Saudis need the money, and must pump, then OPEC lacks any significant coalition to raise prices. ?Prices will rise with growth in demand, and cheap resource depletion… but as for right now, there are enough barrels to come out of the ground below $70.

The Saudi need for money is a much simpler explanation than trying to knock out US shale oil, or gouge the Iranians, because it has the Saudis acting directly in their own interests, and it fits the price series for crude oil better.

PS — One more note: this is mildly bearish for the US Dollar as the US does not have the same dedicated buyer of US Dollar assets as it once did. ?I say mildly bearish, because most of the damage is already past.

April 2016	June 2016	Comments
Information received since the Federal Open Market Committee met in March indicates that labor market conditions have improved further even as growth in economic activity appears to have slowed.	Information received since the Federal Open Market Committee met in April indicates that the pace of improvement in the labor market has slowed while growth in economic activity appears to have picked up.	FOMC shades GDP up and employment down, which is the opposite of last time.
	Although the unemployment rate has declined, job gains have diminished.	Sentence moved up in the statement.? Expresses less confidence in the labor market.
Growth in household spending has moderated, although households’ real income has risen at a solid rate and consumer sentiment remains high.	Growth in household spending has strengthened.	Shades up household spending.
Since the beginning of the year, the housing sector has improved further but business fixed investment and net exports have been soft.	Since the beginning of the year, the housing sector has continued to improve and the drag from net exports appears to have lessened, but business fixed investment has been soft.	Shades up net exports.
A range of recent indicators, including strong job gains, points to additional strengthening of the labor market.	?	Sentence moved up in the statement.
Inflation has continued to run below the Committee’s 2 percent longer-run objective, partly reflecting earlier declines in energy prices and falling prices of non-energy imports.	Inflation has continued to run below the Committee’s 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports.	No change.
Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.	Market-based measures of inflation compensation declined; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.	No change.? TIPS are showing higher inflation expectations since the last meeting. 5y forward 5y inflation implied from TIPS is near 1.48%, down 0.25% from March.? Undid the significant move from earlier in 2016.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability.	Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability.	No change. Any time they mention the ?statutory mandate,? it is to excuse bad policy.
The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen.	The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will strengthen.	No change.
Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further.	Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further.	No change. CPI is at +1.1% now, yoy.
The Committee continues to closely monitor inflation indicators and global economic and financial developments.	The Committee continues to closely monitor inflation indicators and global economic and financial developments.	No change.
Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent.	Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent.	No change.
The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.	The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.	No change.? They don?t get that policy direction, not position, is what makes policy accommodative or restrictive.? Think of monetary policy as a drug for which a tolerance gets built up.
In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation.	In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation.	No change.
This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.	This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.	No change.? Gives the FOMC flexibility in decision-making, because they really don?t know what matters, and whether they can truly do anything with monetary policy.
In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.	In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.	No change.? Says that they will go slowly, and react to new data.? Big surprises, those.
The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.	The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.	No change.? Says it will keep reinvesting maturing proceeds of agency debt and MBS, which blunts any tightening.
Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; James Bullard; Stanley Fischer; Loretta J. Mester; Jerome H. Powell; Eric Rosengren; and Daniel K. Tarullo.	Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; James Bullard; Stanley Fischer; Esther L. George; Loretta J. Mester; Jerome H. Powell; Eric Rosengren; and Daniel K. Tarullo.	Back to unanimity in the monoculture of neoclassical economics.
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.	?	Say bye to the small dissent.