Fed Hawks Squawk

How much leeway does Fed Chair Janet Yellen have in her campaign to hold interest rates low for a considerable period after asset purchases end later this year?  If you listen to Fed hawks, you would believe that she is quickly running out of room.  Dallas Federal Reserve President Richard Fisher argued that the liftoff date for interest rates is creeping forward.  From Reuters:

“I think the committee, as I listen to them and I can only speak for myself around that table during two days of discussion, is coming in my direction, so I didn’t feel the need to dissent,” Dallas Federal Reserve Bank President Richard Fisher said on Fox Business Network.

“We are going to have to move the date of liftoff further forward than had been projected the last time we issued the ‘dots’” he said, referring to the official Fed forecasts for short-term interest rates, last issued in June.

At the time of the June FOMC meeting, the most recent read on the unemployment rate was 6.3% (May), while the July rate was just a nudge lower at 6.2%.  The inflation rate (core-PCE) at the time of the June FOMC meeting was 1.43% (April), compared to 1.49% in June.  So the Fed is arguably just a little closer to its goals, but enough to dramatically move forward the dots just yet?  Not sure about that, but a downward lurch of unemployment in the next report would likely elicit a reaction in the dots.  If the dots don’t move, Fisher promises a dissent at the next FOMC meeting…

Continue reading at Tim Duy’s Fed Watch