Update: So far little that was not in the prepared remarks. Here are the highlights from SMRA:
Reiterated that Fed “is very committed to achieve 2% objective”, expect “over time” that will return toward objective, 12-month inflation rates likely “will remain low until” special factors have aged out, “premature to reach the judgment that we are not on the path” to return to objective, however, will be “watching very closely” the data and are “prepared to adjust” if needed. Policy not on a preset course.
Reduction of balance sheet expected to start “this year”, “to my mind” the start could be “relatively soon”, start of timing “does not matter a great deal”.
FOMC has not discussed whether a rate hike and change to reinvestment policy could happen at same time.
On other topics:
FOMC intends over time to return to primarily Treasurys in its holdings “To the best of my knowledge”, no discussion about Fed buying student debt. “I would be very concerned about subjecting the Fed to appropriations.” Yellen intends to serve out her term as Chair, has not given thought to renomination. “I’m pleased to see a nomination” [of Randal Quarles] for Governor and Vice Chair of Supervision, “look forward” to his input on supervisory issues if confirmed. “We try not to opine” on whether asset valuations are correct or not, as asset prices have moved up “have not seen a substantial increase in borrowing on those valuations”, capital system is “strong” and “resilient”. Low participation rate an artifact of an aging population.
This post was published at Zero Hedge on Jul 12, 2017.
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