While Jerome Powell kept both policy wonks and market participants glued to their screens/terminals/televisions today in the semi-annual Humphrey-Hawkins testimony, his appearance is in conjunction with the official written Monetary Policy Report, a treasure trove of data and a key look into not only how the Fed thinks, but the sorts of inputs they use in their models. Coming in at a more-than respectable 54 pages of content, the report covers a wide range of topics and gives a brief look behind the curtain.
For inflation, the usual boilerplate was brought out:
“Consumer price inflation has remained below the FOMC’s longer-run objective of 2 percent. The price index for personal consumption expenditures increased 1.7 percent over the 12 months ending in December 2017… However, monthly readings on core inflation were somewhat higher during the last few months of 2017 than earlier in the year.”
But underneath those numbers:
“Inflation momentum was also supported by nonfuel import prices, which rose throughout 2017 in part because of dollar depreciation… That development marked a turn from the past several years, during which nonfuel import prices declined or held flat. In addition to the decline in the dollar, nonfuel import prices were driven higher by a substantial increase in the price of industrial metals. Despite recent volatility, metals prices remain higher, on net, boosted primarily by improved prospects for global demand and also by government policies that restrained production in China.”
This may get even more interesting in the coming months as the Commerce Department recently released reports on steel and aluminum imports. Initiated last April in the interest of national security, both reports resulted in recommendations of tariffs. While the White House maintains that no official decision has been made, Trump has made comments in support of potential tariffs according to an article from Reuters:
“U.S. President Donald Trump on Monday said he wants to bring the steel industry back to America even if it means applying tariffs to imports from other countries”.
Even if inflation doesn’t spark your fancy, the Report is worth a glance, addressing everything from financial conditions, productivity, and NAIRU, to Global Equity Markets and Monetary Policy Rules.
