On the June FOMC
With Brexit fears driving a risk-off week, and after a disappointing May jobs report – after an embarrassing three months of policy flip-flops – the FOMC had to do nothing today. We continue to believe it will not do anything this year, at least until December, and probably not even then. Today’s statement took no particular note of Brexit. And it tried to put the happiest possible face on the May jobs disappointment. The “dotplot” for 2016 came down simply with the passage of time and the lost opportunity for a hike today. But estimates for the funds rate consistent with appropriate policy came down further for 2017 and 2018, and for the longer-run, reflecting the FOMC’s continued belief that he natural rate is quite low, on an effectively permanent basis.