A piece from Dr. Richard Clarida, PIMCO's global strategic advisor.
- The Fed statement ... a (very) dovish punt
- No hike today and no reason to think the Fed believes it will hike in December (and forget about October!)
- Statement downgraded the economic outlook in two places
- Clear indication there is that the Fed is worried about inflation expectations moving lower
- "global developments" putting further downward pressure on inflation
- Fed marked down its estimate of NAIRU (the non-accelerating inflation rate of unemployment) from 5.1% to 4.9%, indicating somewhat more slack in the economy than previously thought
- four FOMC (Federal Open Market Committee) participants now want no hike in 2015 (up from two participants in June)
- But it gets even more dovish. The median blue dots in the Fed's Summary of Economic Projections (or SEP, link here) shifted down by more than expected, with the Fed projections even more firmly in New Neutral territory until well into 2018
- Now there are a lot of data points - and potential global developments - to be received between now and the December Fed meeting. But along every dimension, this statement and the SEP that accompanies it give little indication that the Fed has conviction it will hike in December.
The full piece is here, bit that's it in a nutshell (bolding is mine)
Clarida strongly suggesting no hike this year.
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Added ... whether you agree or disagree with Clarida's conclusion, his piece is a great summary of the announcement and statement etc.
