Clarksville, TN – The minutes of the March 15th-16th FOMC meeting showed that most officials did not see much change in their growth outlooks since December, due partly to expectations of a more gradual policy path (recall that most officials had expected four 25-basis-point hikes in 2016, but now see two).
“Several” meeting participants “argued for proceeding cautiously in reducing policy accommodation,” noting the downside risks from the rest of the world and the possibility that inflation expectations could fall.
“A couple” wanted to raise rates at the March meeting. “Many” noted that asymmetry in policy risks. That is, the Fed has a limited ability to use conventional policy in response to economic weakness, but could more easily correct course (by raising rates quicker) if the economy were to prove a lot stronger than expected.
The economic data were mixed. Factory orders were in line with expectations, but durable goods orders fell more sharply than was reported earlier and shipments of nondefense capital goods were on a steeper downward track in 1Q16. The ISM Non-Manufacturing Index rose a bit more than expected.
Stock market sentiment seemed to shift day by day, while the bond market is pricing in a much more gradual glide path for Fed interest rate increases.
Next week, the mid-month data pour in, with a likely focus on the retail sales report. Retail sales were reported soft in January and February, not a big deal, but we want to see better results for March. Unit auto sales fell last month (dealers cited tight inventories of popular models and a lack of incentives).
Higher gasoline prices should add to the ex-autos figure. Core retail sales are likely to be moderate, but watch for possible revisions to January and February. Higher gasoline prices will add to the monthly inflation reports, but the impact will be lessened by the seasonal adjustment. Core inflation should remain moderate.
|Last||Last Week||YTD return %|
Consumer Money Rates
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|Dollars per British Pound||1.406||1.481|
|Dollars per Euro||1.138||1.078|
|Japanese Yen per Dollar||108.210||120.130|
|Canadian Dollars per Dollar||1.315||1.251|
|Mexican Peso per Dollar||17.876||14.933|
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|Last||1 month ago|
|10-year municipal (TEY)||2.54||2.71|
Treasury Yield Curve – 04/08/2016
As of close of business 04/07/2016
|Apr 12th||—||Import Prices (March)
Small Business Optimism Index (March)
IMF World Economic Outlook (updated)
|Apr 13th||—||Producer Price Index (March)
Retail Sales (March)
Fed Beige Book
|Apr 14th||—||Jobless Claims (week ending April 9)
Consumer Price Index (March)
|Apr 15th||—||Empire State Manufacturing Index (April)
Industrial Production (March)
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The information contained herein has been obtained from sources considered reliable, but we do not guarantee that the foregoing material is accurate or complete. Data source: Bloomberg, as of close of business April 7th, 2016.