Subtly Lowering the Bar
MIG sensed a subtle change in July’s FOMC statement. The Committee adopted slightly different language around inflation. They seemed to caveat that measures of core and headline inflation were falling “on a 12-month basisâ€. At the time, we thought they might be indicating a distinction between a tumbling annual rate and potentially more perky monthly changes. If so, it would effectively lower the bar for a December rate hike. That is, so long as the monthly changes were positive, the Fed may feel comfortable raising policy rates then – even if the annual rate of inflation remained sta...