March 2024 FOMC Debrief

Hello my friends, today is March 20th and this is my March FOMC debrief. Now today's meeting was in a word bullish. Now before we get into what actually happened, let's level set a little bit. So over the past two months, we've had inflation pretty much consistently come in hotter than expected be it CPI, PCE or PPI or even input prices. Secondly, it seems like over the past two months, financial conditions have loosened quite a bit. If you look at equities, it looks like the stock market is going to the moon, credit spreads are very narrow and we even had dog with hat make an appearance on the Las Vegas sphere. So there was some expectation going to this meeting that maybe it might be a bit hawkish to try to check the market a little bit, but that did not happen, not even a bit. And I tried to warn you guys.

大家好，今天是3月20日，我要进行我的3月FOMC（美联储公开市场委员会）总结。今天的会议可以用一个词来形容，那就是“牛市”。在跟大家讨论会议的真正内容之前，让我们先稍微梳理下背景。在过去两个月中，通胀几乎一直高于预期，无论是CPI（消费者物价指数）、PCE（个人消费支出指数）、PPI（生产者价格指数）还是成本价格。其次，在过去两个月里，金融状况似乎有所放松。如果你看看股市，就会发现股市似乎在直奔月球，信用利差很窄，甚至有带着帽子的狗出现在了拉斯维加斯的舞台上。因此，有人预计这次会议可能会有点鹰派，试图在一定程度上控制市场，但事实并非如此，一点也不。我曾试图警告大家。

So let's move on to talk about what actually happened today. Let's do this in two parts. First, let's talk about the dot plot and secondly, let's talk about what happened at the presser. So the dot plot is a document that the fed puts out every quarter and on the dot plot, each FOMC participant marks down where they think interest rates, growth inflation, etc. will be for the next few years. The first thing you want to focus on in the dot plot is what the median dot is guiding towards in terms of rate cuts this year. Now in December, the median dot guided towards three cuts this year. Today, that that median dot is unchanged.

那么让我们继续谈谈今天实际发生了什么。我们来分为两部分讨论。首先，让我们谈谈点状图，然后让我们谈谈新闻发布会上发生了什么。点状图是美联储每季度发布的一份文件，在点状图上，每位FOMC参与者都会标出他们认为未来几年利率、增长、通货膨胀等方面会走势。在点状图中，你首先要关注的是中位点显示今年利率将会降低的方向。去年12月，中位点显示今年将有三次降息。今天，这个中位点保持不变。

Now that was the window where there could have been a hawkish surprise, where such as with if the median were to shift towards two cuts this year instead of three, but that did not happen. The second thing I thought noteworthy in the dot plot was that the expectations for GDP were revised higher and notably so. In fact, if you look at the median expectations for GDP this year and the next two years, you notice that they are all above 2%. That is to say, the median person on the FOMC no longer expects a recession. A recession would be when GDP growth growth was below potential, so below 1.8% and if the median person expects GDP to be 2% or above the next few years, then they are no longer expecting a recession.

这次会议中可能会有鹰派意外的窗口，比如如果中值将今年的降息次数从三次调整为两次，但这种情况并未发生。另一个值得注意的事情是在点阵图中，对GDP的预期被上调了，而且幅度相当大。事实上，如果你看一下今年和接下来两年的GDP中位数预期，你会发现它们都超过2%。也就是说，在FOMC中，中位数的人员不再预期会发生经济衰退。经济衰退是指GDP增长低于潜在增长，即低于1.8%，如果中位数的人员预期未来几年的GDP将保持在2%或以上，那么他们不再预期经济衰退。

Now related to that, we also see inflation expected to be slightly higher this year and well, next year then they did last time, but only slightly so. So I don't think it's a big deal. Now the last thing that I thought was pretty interesting was that the long-term neutral rate for the median FOMC participant was revised ever so slightly higher from 2.5% to 2.6%. So the neutral rate is basically an imaginary rate that the Fed uses as a benchmark to know whether or not monetary policy is restrictive or accommodative.

现在相关的是，我们也看到通货膨胀预计在今年和明年略高于上一次，但只是略高而已。所以我认为这不是什么大问题。最后我觉得很有趣的是，FOMC参与者的长期中性利率被略微调高，从2.5%到2.6%。中性利率基本上是联邦储备委员会用作基准的虚拟利率，用来判断货币政策是收紧还是宽松。

So if you set monetary policy above what you think of as neutral, you're basically doing restrictive monetary policy and trying to slow the economy down and if you set policy below neutral, you are easing policy and trying to boost the economy. Now it seems like there are people on the Fed noticing that, hey, over the past two years interest rates were 5% but the economy continues to do well. So maybe the economy is not as sensitive to interest rates or another way to say that is maybe the neutral rate is higher than we thought it was. And so we have that median move from 2.5 to 2.6, which is barely anything at all and in my personal view, neutral is much higher than 2.6 and that just means stocks are going to go even higher because they have this policy error.

因此，如果您将货币政策设置在您认为的中性水平之上，实际上您正在实施紧缩的货币政策，试图放缓经济增长；而如果您将政策设置在中性水平之下，您就是在放宽政策，试图刺激经济增长。现在似乎有一些美联储的人注意到，过去两年利率为5%，但经济仍然表现良好。也许经济对利率并不那么敏感，或者另一种说法是，也许中性利率比我们认为的要更高。因此，我们将中点调整从2.5到2.6，这几乎没有什么变化。在我个人看来，中性利率远高于2.6，这意味着股市将继续上涨，因为他们犯了这个政策错误。

Okay, let's get into what J-PAL was talking about at the press conference. Now the most notable thing at the press conference was as Chair Powell had teased the last time he had the last meeting, they did have a discussion as to what to do with QT going forward and Chair Powell very strongly hinted that at the next meeting, they're going to taper QT. Now he was careful to say that, you know, tapering it doesn't mean that we're just going to end it, right? Maybe when we taper it so that we can go even further because by tapering it, we're making it so that a QT doesn't cause any unexpected blow-ups that would force us to stop the process. And so by tapering QT, maybe we can go longer. So in that sense, he's kind of trying to soften the implications of this. Again, if we were doing, if we are tapering QT, the Fed is streaking its balance sheet at a smaller pace. Again, the supply of treasuries going to the private sector is going to decrease because the Fed is not going to be streaking its balance sheet as much. So that's, you know, unambiguously easing policy. He softens that a little bit by saying that, hey, maybe that means we'll do QT for a longer period of time, but that's so far into the future. I don't think it's impactful. So I view this as a dovish move. And we also had a couple interesting questions that were able to get some candid responses from Chair Powell.

好的，让我们谈一谈J-PAL在新闻发布会中所谈论的内容。在新闻发布会上最引人注目的事情是鲍威尔主席在上次会议上透露的，他们讨论了未来如何处理QT的问题，鲍威尔主席非常强烈地暗示在下次会议上他们将逐步缩减QT。他小心翼翼地表示，缩减并不意味着我们将完全停止，或许通过缩减我们可以走得更远，因为通过缩减，我们可以避免QT引发任何意外爆炸，迫使我们停止这个过程。通过逐步减少QT，也许我们可以延长这一过程。从这个意义上说，他试图缓和这个措施的影响。再次强调，如果我们正在逐步减少QT，联邦储备系统正在以更小的速度收缩资产负债表。再次减少私营部门的国库券供应，因为联邦储备系统不再像之前那样迅速收缩资产负债表，这无疑是放松政策。他稍微缓和了这一点，表示也许这意味着我们将会延长QT的时间，但这到了很遥远的未来，我认为不会产生影响。我认为这是一次鸽派举措。我们还提出了一些有趣的问题，能够从鲍威尔主席那里得到一些坦率的回答。

The first, of course, is addressing what many people are thinking. Well, Chair Powell, we got, you know, inflation was a, you know, pretty hot prince for January and February. Why, why aren't you changing your sense of policy? And to which replied? So the, but I would say the January number, which was very high, the January CPI and PCE numbers were quite high. There's reason to think that there could be seasonal effects there. But nonetheless, we don't want to be completely dismissive of it. The February number was high, higher than expectations. But we have it at currently well below 30 basis points core PCE, which is not terribly high. So it's not like the January number. But I take the two of them together, and I think they haven't really changed the overall story, which is that of inflation moving down gradually on a sometimes bumpy road toward 2%. Basically, he's telling you that, yeah, we didn't, we were always expecting data to be a bit more bumpy. So, you know, not a big deal. Let's see what, what's, what happens. So he was willing to shrug it off, basically. And only two months, I think that's understandable.

当然，第一个问题是解决许多人所思考的问题。嗯，Powell主席，你知道，1月和2月的通胀率相当高。为什么你不改变政策呢？他回答说？所以，但我想说1月的数字非常高，1月的CPI和核心PCE数字都相当高。有理由认为可能存在季节效应。但尽管如此，我们不想完全对此置之不理。2月的数字也很高，超出了预期。但我们目前的核心PCE数值仍远低于30个基点，不是非常高。因此，它并不像1月的数字那样。但我将两个月的数据综合考虑在一起，我认为它们并没有真正改变总体情况，即通胀逐渐降至2%的目标。基本上，他告诉你，是的，我们一直预料数据会有点波动。所以，没什么大不了的。让我们看看接下来会发生什么。所以，他基本上是愿意不予理会，只有两个月的数据，我认为这是可以理解的。

Now, the second thing he was basically asked about was how he felt about financial conditions. Obviously, many people look at what's happening in the markets and think that financial conditions are loose. What does Chipau think? Ultimately, we do think that financial conditions are weighing on economic activity. And we think you see that in a great place to see it as in the labor market, where you've seen demand cooling off a little bit from the extremely high levels. And there I would point to job openings, quits, surveys, the hiring rate. So, Chipau basically is telling you that he thinks financial conditions are restrictive. I don't know why he thinks that. I think it probably has to do with where he thinks neutral rate is or something like that. Or maybe it's just an excuse because he doesn't want to do anything about the stance of monetary policy. But, you know, you know, he's been very consistent and so have many other people on the FOMC. Notwithstanding what market participants look at, say, equity prices, credit spreads, and so forth, people on the FOMC have been very consistent in telling you that they think the policy is restrictive. So, yeah, that's that. And that's kind of why I think we're just going to go into a crash-out mode again.

现在，他基本上被问及的第二件事是他如何感觉关于金融状况。显然，许多人看着市场的变化，认为金融状况很宽松。Chipau认为怎么样呢？最终，我们确实认为金融状况正在对经济活动产生影响。而我们认为你可以在劳动力市场中看到这一点，你可以看到需求在逐渐从极高水平冷却下来。在这里我指的是岗位空缺，离职率，调研，招聘率等等。所以，Chipau基本上告诉你，他认为金融状况是束缚的。我不知道他为什么这么认为。我觉得这可能与他认为中性利率在哪里之类的有关。或者，也可能只是一个借口，因为他不想对货币政策的立场做任何改变。但是，你知道，他一直非常一致，FOMC中的许多人也是如此。尽管市场参与者看到的是哪些方面，比如股票价格，信用利差等等，但FOMC的成员一直非常一致地告诉你，他们认为政策是有限制的。所以，是的，就是这样。这也是我认为我们可能会再次陷入恶化的原因。

So, on the one hand, Fed is being dovish now that I think that's really good for asset prices. Probably not good for inflation. I'm thinking that we're probably going to stabilize between 3% and 4% inflation. But I don't think that's going to be apparent until later on in the year. And then, I think the Fed will have to reassess how they think about the world. But until then. All right, thanks for tuning in. Be back this weekend for Markets Weekly.

因此，一方面，美联储现在持鸽派立场，我认为这对资产价格非常有利。可能对通货膨胀不利。我认为我们可能会在3%和4%的通胀率之间稳定下来。但我认为这可能要到年底才会显现出来。然后，我认为美联储将不得不重新评估他们对世界的看法。但在那之前。好的，感谢收听。本周末记得回来看《市场周报》。