Under Powell’s reign, the FOMC statements have gotten shorter. It’s not as if the policy has suddenly simplified since the rate hikes in 2019 will push rates near the neutral rate or above it, making the decisions difficult. Secondly, the Fed is continuing with its balance sheet unwind which is probably going to end in the next 1-3 years barring a recession. The image below shows the November FOMC statement where the Fed kept rates the same as was expected.

Source: Twitter @bespokeinvest

Powell has been open in his press conferences which are being posted to YouTube, but the statements give the appearance that the Fed doesn’t want to interfere in the marketplace.

The Fed didn’t mention the stock market correction in this statement and didn’t change policy guidance during the volatility in October. That was probably a good idea because stocks have snapped back quickly. Chasing stocks after normal corrections makes policy confusing. Investors had gotten used to guidance changes after volatility in the past. It will be interesting to measure the sensitivity of the new FOMC because at some point the Fed probably will step in if stocks crater or the economy falters. As we reviewed previously, here’s the magic number when the Fed could reverse course.  

There was only one material change to the FOMC statement from the September meeting to the November meeting. The Fed stated business investment “has moderated from its rapid pace earlier in the year” instead of saying it grew strongly. That change comes because the Q3 GDP report showed business investment grew 0.8% after following the growth of 8.7% in Q2 and 11.5% in Q1. The Fed didn’t mention the possibility that this change in investment growth may have been caused by the fiscal stimulus losing steam.

More Hawkish Than ECB

Even though it’s nice for the Fed to avoid commenting on short-term action in stocks and avoid claiming the stock market is overvalued like Yellen’s Fed did on multiple occasions, it’s slightly disconcerting that the Fed didn’t acknowledge the weakness in global growth, the weakness in housing, the trade war, the fiscal stimulus running out of steam, or the acceleration in wage growth. These topics will probably be brought up in the December 19th press conference where the Fed is expected to raise rates for the 4th time this year.