德银-美股-宏观经济-美联储观察员：核心通胀难题将在2018继续下去？-20171218-6页_619kb

Fed Watcher: Core Inflation Conundrum to Continue in 2018?

Core Content Summary

This document from Deutsche Bank Research provides an analysis of the U.S. Federal Reserve's monetary policy outlook for 2018, focusing on inflation and interest rate expectations. The report highlights the Fed's continued emphasis on inflation as a key determinant of future rate decisions, despite recent data suggesting a cooling trend in core inflation.

Main Points

1. Inflation Outlook

• Core CPI Inflation Missed Expectations: Core inflation data fell below expectations, with several categories showing sharp declines.
• Fed's Alternative Gauges: Some alternative inflation measures from the Fed suggest a potential pickup in core inflation for 2018.
• NY Fed Inflation Gauge: Indicates that core inflation may become firmer in the coming year.
• Uncertainty: The Fed is still grappling with the "core inflation conundrum" — the discrepancy between core inflation data and the central bank's inflation expectations.

2. Federal Reserve Policy Outlook

• Rate Hikes Expected: The Fed is expected to raise interest rates four times in 2018, with the first hike likely in March.
• FOMC Meeting Takeaways:
  • Rates were raised by 25 basis points as expected.
  • The median FOMC dot (projection of future rate hikes) remained unchanged, except for a higher dot in 2020.
  • Growth and unemployment forecasts were upgraded, partly due to the tax plan, but inflation forecasts showed little change.
  • The Fed's tone was modestly dovish, as they did not raise the dot forecast, but expressed optimism about growth and inflation.

3. Key Voices from the Fed

• Evans:
  • Expressed concern about persistent disinflationary forces.
  • Warned about slipping inflation expectations.
  • Raised the possibility that the Fed's credibility in maintaining a 2% inflation target could be at risk if rate hikes occur despite low inflation.

4. Policy Impact and Dovish/Hawkish Scores

• Policy Impact: The speech and research by Fed officials are seen as having a modestly dovish impact on monetary policy, as the Fed did not signal a more aggressive rate path.
• Hawk-Dove Scores:
  • The FOMC meeting had a neutral to dovish tone.
  • Evans had a dovish stance, reflecting concerns about inflation dynamics.

Key Information and Insights

• Inflation as a Central Focus: The Fed's rate trajectory for 2018 is heavily influenced by inflation, even as core CPI data remains below expectations.
• Tax Plan Influence: The FOMC upgraded growth and unemployment forecasts due to the impact of the tax plan, but inflation forecasts were largely unchanged.
• Risk of Misaligned Policy: If the Fed continues to raise rates in the face of weak inflation, it risks undermining its credibility in maintaining the 2% target.
• Market Implications: The report suggests that market participants should closely monitor inflation data and Fed communications, as they will play a crucial role in shaping the rate outlook.

Conclusion

The Fed Watcher report underscores the central bank's dilemma in navigating a mixed inflation environment. While the Fed is expected to maintain a hawkish stance with four rate hikes in 2018, the underlying inflation data remains weak, creating uncertainty about the sustainability of this path. The report calls for continued vigilance in monitoring inflation trends and Fed communication, as these will be critical in determining the central bank's policy direction.