Analysis from Steve Beckner, Fed watcher at MNI
In brief:
- It seems clear lift-off for the federal funds rate will be further delayed, despite more encouraging economic numbers
Q2 data have been looking better and better
- NFP rebounded even more than expected for a second straight month in May
- Sluggish consumer spending ... but May retail sales jumped 1.2% (1% excluding autos)
- Also been signs of firming in wages and prices
- Some economists projecting Q2 GDP growth well in excess of the 2% to 2.3% "longer run" pace which FOMC participants estimated in their March
- Threshold still fairly high for starting to raise the funds rate
Officials want to see more data & more confirmation that the economy is meeting the two conditions the FOMC laid out in its last two policy statements:
- further improvement in labor markets
- and becoming "reasonably confident" inflation is headed up to 2% "over the medium term"
Recent comments from Fed officials are still cautious:
- New York Fed Dudley continued to speak cautiously ... vague about the timing of lift-off
- Governors Brainard & Tarullo evinced similar hesitancy
- Chicago Fed's Evans continued to favor delaying rate hikes until 2016
- Boston Fed's Rosengren ... said soft data since the start of the year "demonstrate why the conditions for beginning the tightening of monetary policy have not yet been met"
- St. Louis Fed's Bullard, who has long argued rate hikes are overdue, sounded cautious
