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FOMC Minutes Betray Early Concern Over Tariffs, Deportations
During last month's press conference, Jerome Powell went out of his way to suggest upward revisions to the Fed's inflation projections in the new SEP weren't solely, or even mostly, attributable to the election outcome and the macro read-through of Donald Trump's policy proposals.
Some were skeptical. After all, the Committee didn't get much in the way of new information on the macro front between November's FOMC meeting and the December policy gathering -- just more of the same, which in this
I recall Powell saying at the last FOMC that some members tried to factor in policy changes and others didn’t; the impression I had was his attempt to shield the Fed from political ire.
We know that Trump’s stated policies, if carried out, are probably inflationary (putting aside the scenario of an economic slowdown deep enough to be deflationary). Bond investors have no need to shield themselves from political ire (yet?) and their repositioning on the long end seems similar to some FOMC members thinking on the short end.
Plus volatility and uncertainty higher [lower] should mean term premium higher [lower]. And maybe the algos are having a hard time deciphering tweets that read like The Onion parodies.
Anyway that’s my not-a-bond-guy explanation.