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No Need to Argue: Focusing on the Right Fed Utterances

Plus, the durable goods numbers point to -- guess what? -- no slowdown.

Cranberries Do Fed Policy

JACKSON HOLE, Wyo. -- Came across something particularly rich yesterday.

One of the most pathetic and truly dim members of the profession was speculating about when the


would move back to a neutral directive from the tightening bias it adopted on the 18th.

I kid you not.

Sticking to your guns is one thing. Ignoring the real world for months on end is quite another.

So do me a favor? Check my head (go


) on something. The passage that follows is from the

minutes of the March 30



While many FOMC members believed that the next policy move likely would be in the direction of some tightening, such an outcome was not a foregone conclusion, and in any event the timing of the next policy action was highly uncertain. It also was noted that a biased directive would not be consistent with the members' view that a policy adjustment was unlikely in the period just ahead.

That latter sentence is as clear as an azure sky of deepest summer; Fedspeak will never get more lucid than that. Fed members did not adopt a tightening bias at the conclusion of the March 30 FOMC

meeting because they thought they were unlikely to raise the

federal funds

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rate over the next few months.


We know the Fed members did

adopt a tightening bias at the conclusion of the May 18 FOMC meeting.

So is it not reasonable to conclude that they now think they are likely to raise the funds rate over the next few months? Especially if inflation does not move lower while growth remains above trend and labor markets tighten further?

And No. It is never wise to read too much into any one or two Fed sentences. But the New-Era/economic-slowdown/bond-yield-back-to-4% types persist in serving up entirely warped and just plain idiotic interpretations of Fed testimonies and speeches (see a recent

column for examples).

Everybody else is parsing, so why can't we?

And if we're going to pick and choose, we ought to at least focus on the right things.

Missing You

Listen up.

It's somewhat understandable that folks would see an "Orders for Durable Goods Down Big in April" headline and get hap-hap-happy about the that-much-likelier prospect of the economy slowing all on its own (and hence a sidelined Fed).

But your narrator implores you to refrain from doing so.

The numbers from today's

durable goods

release that will show up in the second quarter

gross domestic product

number paint a growth profile stronger than the one that prevailed a month ago.

A month ago, for example, shipments of nondefense capital goods excluding aircraft, which fell 2.4% during the first quarter, were on track to post a 3% second-quarter increase. (Please see a recent

column for details about the importance of this series and how it fits into the overall business investment picture. Most market participants have absolutely no clue as to what's really going on with things like this.)

Now, owing to a 0.6% April increase, they will post an 8.4% second-quarter increase (which will go down as the biggest since the first quarter of 1998) even factoring in very conservative performances for the remaining two months of the quarter (a 0.9% drop in May and a 0.1% increase in June).

And that, combined with the roughly-level-to-better trajectories of both motor vehicles (on track to fall 0.9% during the second quarter vs. 0.4% during the first) and aircraft (on track to fall 4% vs. 13.9%), spells an improved business-investment performance.

Indeed. Business investment contributed almost a full percentage point (0.87 to be precise) to the growth rate in the first quarter (4.5%), and right now it is set to add even more than that during the second.

No slowdown here.

The Fed knows it. So should you.

Side Dish

Accepting write-ins for the poll today. And please keep it derogatory. Also: Readers with children (along with childless adults with childlike brains) may

spot a



Name that pod?


The View.

Bert and Ernie.

Petticoat Junction.

Dear Abby-Kernen Ann-Landers-Faber.