Analysts scrutinize the statements released immediately following the meetings of the Federal Reserve’s monetary policy setting arm, the Federal Open Market Committee (FOMC) for hints about the likely direction of policy. The statement released after the November meeting was largely a rerun of that following the September meeting. Very few of the words changed. A mild deceleration in household spending in the third quarter from a more robust pace in the second quarter motivated the change to “rising moderately” from “growing strongly” in September. Monthly job gains were upgraded to “solid,” from “solid, on average.” And the expectation that inflation “would remain low in the near term” was dropped completely as a qualifier on the expectation of rising inflation over the medium term.

The most important language that was repeated almost verbatim was “The Committee judges that the case for an increase in the federal funds rate has continued to strengthen, but decided, for the time being, to wait for some further evidence of continued progress toward its objectives,” and within that language, “for the time being.” This sentence was new to the statement in September and a clear signal that the committee is inclined to take the next step, under the right conditions. With the consensus inching toward that position, and despite protestations of being of being 100% apolitical, the upcoming elections made a November hike highly unlikely. Coupled with the emphasis on clear communication, the December meeting, with its scheduled press conference is a better choice. So in this case, “for the time being” may be roughly translated to “six more weeks.”

Tags: Federal Reserve, FOMC, monetary policy