July 2024 FOMC Debrief

Hello, my friends. Today is July 31st, and this is my July FOMC debrief. So we just had Chair Powell's presser, what happened. Now, before we get into what happened today, let's level set a little bit. So the last time we had an FOMC meeting was in June, and June was one of those special meetings where we got a Fed.plot. Now, through the.plot, the Fed guided towards one cut this year and they also forecast that inflation, their favorite measurement of inflation, core PCE, would end the year at 2.8% year over year, and they forecast that the unemployment rate would be 4% at the end of the year.

你好，我的朋友们。今天是7月31日，这是我对7月联邦公开市场委员会（FOMC）会议的总结。我们刚刚听了鲍威尔主席的新闻发布会，发生了什么呢？在讨论今天的情况之前，让我们先回顾一下背景。上次FOMC会议是在6月，6月的会议是一次特别会议，我们得到了美联储的预测指引。通过这个预测，美联储引导我们相信今年会有一次降息，他们还预测他们最喜欢的通胀测量指标——核心个人消费支出（PCE）在年底的同比增长率将为2.8%，并且预计年底的失业率将为4%。

Now, between June and now, we got a lot of data, and it was very, very good from the Fed's perspective. Now, looking at inflation, core PC is now printing at 2.6% year over year. So far ahead of the Fed's forecast. Looking at the unemployment rate, we've actually edged up above the Fed's forecast 4% and most recently printed at 4.1%. So if you're the Fed, you're making a lot more progress on inflation and at the same time, it looks like the economy is softening a bit. So obviously, you have to be thinking about cutting rates.

从6月到现在，我们收集了大量数据，这些数据从美联储的角度来看非常好。现在，观察通胀情况，核心个人消费支出年率现报2.6%，远低于美联储的预期。再看失业率，我们实际上已经超过了美联储预测的4%，最新报4.1%。所以，如果你是美联储的决策者，你会发现通胀情况有了很大进展，同时经济似乎也有一点放缓的迹象。因此，很明显，你必须考虑降息。

Now, heading into this meeting, the market was pricing in three cuts for the rest of this year, starting in September. Now, Chair Powell basically delivered on that, but let's get into what happened. Now, the first thing you get in a meeting is the FOMC statement, and the FOMC made a number of changes. Let's look at what those changes are. Now, when you look at the red line here, you notice that first the Fed acknowledged that data has been softer than they thought. So, job gains, instead of saying remain strong, they have moderated and the unemployment rate moved off, although, of course, still remaining low.

现在，在进入这个会议时，市场预计今年剩余时间会有三次降息，从九月开始。现在，鲍威尔主席基本上达成了这一预期，但让我们来看看具体发生了什么。首先，在会议上你会得到FOMC声明，FOMC进行了若干修改。让我们来看一下这些变化。当你看这里的红线时，首先注意到美联储承认数据比他们预想的更加疲软。所以，工作增长率，他们不再说保持强劲，而是有所放缓，失业率也有所上升，尽管仍然保持在较低水平。

Now, something very interesting is that their commentary on inflation, in that instead of it being elevated, they've kind of downgraded it a bit to somewhat elevated, again, acknowledging progress on inflation and also the softening labor market. Now, the most important change is the last sentence. in that last sentence, the Fed is emphasizing that both sides of the mandate are becoming important. Now, over the past two years, the Fed, being a two-mandate bank, full employment and price stability, have heavily emphasized inflation side of their mandate. Now, though, with inflation close to 2% and the unemployment rate weakening, the Fed can't just emphasize inflation. Now that its two mandates are more in balance, they're going to have to think hard whether or not monetary policy should be the most restrictive it's been in decades.

现在，有趣的是他们对通货膨胀的评论。他们没有继续说通货膨胀非常高，而是调低了一些，称其为“有些高”，这表明他们承认在通胀控制方面取得了一些进展，同时也注意到了劳动力市场的疲软。最重要的变化是在最后一句话中。在那句话里，美联储强调其双重任务的双方都变得重要。过去两年里，作为一个有两大任务的银行——充分就业和价格稳定，美联储一直高度重视其任务中的通货膨胀方面。但现在，随着通货膨胀接近2%，失业率也在上升，美联储不能再只重视通货膨胀问题。现在，它的两个任务更趋平衡，他们必须认真考虑，是否货币政策需要保持几十年来最严格的状态。

Now, the first thing everyone wanted to know at the press conference was, are you going to cut rates and when? And so, Chair Powell, of course, knows this is happening, and so he began with a somewhat scripted answer about September. Let's listen. On September, let me say this. We have made no decisions about future meetings, and that includes a September meeting. The broad sense of the committee is that the economy is moving closer to the point at which it will be appropriate to reduce our policy rate. In that, we will be data-dependent, but not data-point-dependent, so it will not be a question of responding specifically to one or two data releases. The question will be whether the totality of the data, the evolving outlook in the balance of risks, are consistent with rising confidence on inflation and maintaining a solid labor market. If that test is met, a reduction in our policy rate could be on the table as soon as the next meeting in September.

现在，每个人在新闻发布会上首先想知道的是，你们会降息吗？什么时候降息？所以，当然，鲍威尔主席知道大家有这个疑问，于是他开始用一个有些准备好的答案来谈论九月的情况。让我们听听看。 关于九月，我要说的是：我们尚未对未来的会议做出任何决定，包括九月的会议。委员会的整体看法是，经济正逐步接近适合降低政策利率的地步。在这方面，我们将依赖数据，但不会依赖单个数据点。因此，这不是对一两个数据发布的具体回应的问题。问题在于，所有数据的整体性、风险平衡中的变化前景，是否与通胀上升的信心和维持稳固的劳动力市场相一致。如果满足这个标准，我们可能在下次九月的会议上就讨论降低政策利率。

So, again, Chair Powell being a central banker is never going to give you certainty. It's always conditional, it's always stuff like that, but they talk in, I guess, suggestions in very soft ways. Now, he mentioned September, and he basically says that, as long as nothing really weird or terrible happens, we're going to cut in September. That's as sure as you will ever get from a central banker, and that is what the market acknowledges, and that's really what everyone in the market already thinks as well. So, it's really no surprise.

所以，再次强调一下，鲍威尔主席作为央行行长，永远不会给你确定的答案。一切都是有条件的，总是这样那样的东西，但他们的措辞通常比较委婉。他提到了九月份，并基本上说，只要没有特别奇怪或糟糕的事情发生，我们将在九月份降息。这就是你从央行行长那里能得到的最明确的表态，市场也认可这一点，事实上市场里的人本来也是这么想的。所以，这真的不奇怪。

Now, something else that I thought was pretty interesting in this press conference was how to how to characterize the change in inflation. Let's take a listen as to how he thinks inflation now is different than it was last year. Actually, what we're seeing now is a little better than what we saw last year. Last year, as we pointed out late in the year, a whole lot of the progress we saw last year was from goods prices, which were going down at an unsustainable rate, disinflating at an unsustainable rate. This is a broader disinflation. This has goods prices coming down, but we're also now seeing progress in the other two big categories. Non-housing services and housing services. The thing is, you've got one quarter of that. We had seven months of low inflation. You've got one quarter of this. I would say the quality of this is higher, and it's good, but so far it's only a quarter. So, basically, Chair Powell was saying that, yeah, last year we got a lot of disinflation, but that was just goods, and we couldn't always expect goods to go down down, and then to deflation. That's not realistic. So, he's saying that disinflation now is broader, and he finds that to be more comforting because it suggests that the disinflation process is more, more and more thrilled this time, and so it's less likely to be some kind of head fake.

现在，这场新闻发布会上我觉得还蛮有意思的另一个点是如何描述通胀的变化。让我们听听他是如何看待当前通胀与去年的不同之处的。事实上，我们现在看到的情况比去年要好一些。去年，如我们在年底指出的那样，大部分的通胀缓解来自于商品价格的下降，但这种下降速度是不可持续的。这是一种更广泛的通胀缓解。不仅是商品价格在下降，我们现在也在另外两个大类中看到了进展：非住宅服务和住宅服务。关键是，现在你有一个季度的数据。我们经历了七个月的低通胀，而现在你有一个完整的季度。我会说这种通胀缓解的质量更高，这是好的，但目前还只是一个季度。所以，基本上，鲍威尔主席在说，是的，去年我们确实看到了很多通胀缓解，但那只是商品价格的下降，而商品价格不可能一直下降，甚至进入通货紧缩。这不现实。所以，他说现在的通胀缓解范围更广，这让他感到更放心，因为这表明通胀缓解过程更加稳定，不太可能是一种短暂的假象。

So, overall, I think this was a meeting as expected, not super interesting. Again, Fed Incheon Toward Rate Cuts. The market right now continues to price about three cuts this year, and that is my expectation as well as I've been saying over the past few months. The equity market, of course, liked this upcoming rate cuts. Also note, of course, that today we looks like we have some geopolitical risk in the headlines, and we also have MAG 7 earnings today, and as well as tomorrow. So, a lot of stuff happening, but as far as the Fed is concerned, we are on the path to rate cuts probably through this year. All right, that's all for today. I'll be back on Saturday for markets weekly. Talk to you all then.

整体来看，我认为这次会议如预期那样进行，没有特别有趣的内容。再次确认，美联储正朝着降息方向迈进。市场目前预计今年将进行大约三次降息，我过去几个月也是这样预测的。股市当然对即将到来的降息表示欢迎。此外，今天我们似乎面临一些地缘政治风险的头条新闻，今天和明天还有 MAG 7 的财报要发布。所以，有很多事情在发生，但就美联储而言，我们可能在今年年内会继续走向降息的道路。好了，今天就到这里。周六我会回归市场周报。到时候再聊。