Fed to release April minutes
Fed to release April minutes
Fed meeting minutes to be released this week
In contrast to the packed economic calendar of one week ago, this week’s economic releases will be comparatively sparse. Most notable will be Wednesday afternoon’s release of the April Fed meeting minutes. The Producer Price Index is slated for release tomorrow, but much of that thunder was stolen by last week’s Consumer Price Index. While the CPI was seen as better-than-expected, a more accurate descriptor is “not-as-bad-as-it-could-have-been.” Headline CPI was up 3.9 percent in the past 12 months and the core rate has advanced 2.3 percent in the same time period. Both are outside the bounds of what we would call “low inflation.” The Fed is aware of this, and the meeting minutes to be released this week will be parsed to gauge whether the Fed has a balanced risk assessment between inflation and economic weakness.
Last week’s economic releases were a mixed bag. Retail sales, excluding autos, gave reason for hope as it showed strong advances in April on top of upward revisions to March sales. The consumer isn’t dead, folks.
But a couple of readings late in the week - industrial production and the Philadelphia Fed’s Business Outlook Survey - were poor, which kept the pendulum of economic sentiment swinging.
Interest rates have increased by a substantial margin since the March lows, when the outlook was for something akin to financial armageddon. The absence of further upheaval in credit markets has vanquished the worst-case scenario as the prevailing sentiment and while the credit markets are still hampered, the outlook is now more positive. Consequently, yields for both Treasuries and CDs have moved up in recent weeks but still remain very low considering the current level of inflation.
For the Fed to remain on hold with interest rates requires no additional deterioration in the overall economy or the conditions in financial markets. Inflation figures might suggest a quick turnaround by the Fed toward raising interest rates, but the economy, housing market and upcoming presidential election provide little latitude to do so. The Fed continues to state their belief that inflation will moderate on its own in the coming months. They’d better be right.