Jonathan Levin: The Federal Reserve is just like us

The strongest institution in the global economy looks fully as we rest, as members of the Federal Reserve Definition Committee kept prices at a level of between 4.25% and 4.5% at the meeting of the monetary policy Wednesday, but federal president Jerome Powell and his colleagues mainly maintained that they would not know what would happen later. They could not predict the exact path of President Donald Trump’s customs tariffs, not to speak how it affects the consumer and the labor market. Nor were they able to evaluate sharp changes in public immigration and financial policy and the rising war between Israel and Iran. The biggest danger, of course, is that the uncertainty and hesitation to the delay in the federal leads to a possible increase in unemployment rates. The expected reduction in the interests of economic expectations, the middle of the expectations of the Federal Open Market Committee, estimated interest rates this year. But this ‘basic scenario’ is a strong simplification of expectations. Some investors may also underestimate the size of extremist possibilities within the possible results, even during the next three or four months. Under 19 participants saw 14 policy modes that the risks of their expectations about inflation tend to the upward tendency, the same number as those who considered the risks for their unemployment expectations as well as climbing up. In short, they do not claim to know what’s coming, but the head of the Federal Reserve, Powell, believes that things can be clear. Under the statement of Powell during the press conference followed by the decision: “We believe that summer will have very clarity on customs duties. We did not expect its consequences to appear at the moment, and that is what actually happened. We will see to what extent it will appear in the coming months. The US Monetary Policy Path is vulnerable to rapid change due to all this mystery, Powell is ready to adopt the anticipation and waiting approach, but he cannot stay in this situation as soon as the data is issued, and in the meantime we must prepare observers from the scene for the possibility of changing the path of monetary policy, and perhaps start from the Federal Reserve meeting on September 16-17. Maybe we really get a reduction in interest rates this year, but it is also logical that we can see discounts by 150 basis points – or not be reduced at all. It is an ideal environment for big gambling, but it is not for American families. As Powell has played, it is the commercial policy that places us all to a large extent in this dilemma. In recent months, the deflationary trends in the housing sectors and non-residential services have led to the high price of basic expenses for personal consumption- which is the preferred federal inflationary- by about 2.6% in May on an annual basis (based on the “Bloomberg Economics” estimates, derivatives from price data consumers and producers). It is not bad at all, and it was possible that he would have been to the federal goal of 2% if it was not for the unjustified commercial wars that Trump launched at a very bad time. Significant risks that threaten the federal task without customs tariffs would have reduced the federal interest, which would have reduced interest, which would provide support for a volatile job market and a housing market in which prices began to fall annually in some parts of the country. Unfortunately, the central bank must handle the available data. In the short term, we are still unaware of whether businesses will transfer prizes to consumers, or accept less profit margins, or retain prices by making part of their employees or possibly using a mixture of these three measures. The risks that threaten the task of the Federal Reserve are related to the stability of prices and the achievement of maximum employment, and it causes a state of paralysis among policy makers, in a strange way that is “the calm the storm precedes, either within the federal or in the financial markets. The idea of ​​raising interest can return, but in the leading city phase, it is very likely that it is broken by this calm, such as a worrying leap in the initial requests for unemployment subsidy that reduces interest rates in a way that exceeds the basic scenarios of any of the policy makers. Regarding a report or two annoying about the consumer price index, the federal may remain in a longer period and investors drive to sell bonds. In the case of the actual inflation and indications of the investigation into inflation, the idea of ​​increasing interest may return to the table. If federal damage is reduced, policymakers will be able to call on Trump’s self -destructive trade policy. But they must be ready to move immediately and decisively as soon as the signals begin to crystallize in a certain direction.