Fed: Rethinking the strategy - Rabobank

Philip Marey, Senior US Strategist at Rabobank, notes that in addition to near-term monetary policy there was a discussion of the broader monetary policy strategy of FOMC as indicated by the release of November minutes.

Key Quotes

“In particular, accumulating evidence of slow trend productivity and output growth and associated persistently low levels of neutral interest rates, both in the US and abroad, had potential implications for the most effective policy implementation framework for the Federal Reserve in coming years as well as the monetary policy strategy that would best promote the Committee's macroeconomic objectives.”

“However, the President-elect is likely to join that debate next year. The tendency of Fed Board members not to serve their full term and the difficulty for President Obama to get nominations approved by the Republican-controlled Senate have made the Fed’s independence more vulnerable than intended. Trump plans to fill two vacancies on the Board of Governors in the first three months of his presidency, and replace Fed Chair Yellen when her term has expired in February 2018. What’s more, Vice Chair Stanley Fischer’s term ends in June 2018. So while it may still be business as usual for the Fed in 2017, during the course of 2018 we may very well see the Fed take a different approach than its current ‘gradual and cautious’ hiking cycle.”