Little Chance the Fed will “Snuff Out” Expansion Anytime Soon

Little Chance the Fed will “Snuff Out” Expansion Anytime Soon

Little Chance the Fed will “Snuff Out” Expansion Anytime Soon


The Fed is unlikely to take actions that would “snuff out” the current US economic expansion anytime soon because inflation is not a problem, according to Federal Reserve Bank of New York President William Dudley.

Tuesday, Mr. Dudley, in a speech to a gathering of the National Retail Federation in New York, said he is “optimistic the current expansion will continue even though it is long in the tooth” by historical standards.

He said that economic expansions end either because inflation climbs and the Fed responds with much tighter monetary policy or because of a large, unanticipated shock that overwhelms both fiscal and monetary policy makers’ abilities to respond with sufficient force.

Shocks are “by nature” hard to forecast, he said, but in the case of inflation, it does not pose an imminent threat.

“Not only are underlying inflation trends very subdued – for example, the core personal consumption expenditures deflator has risen at only a 1.7% annual rate over the past year, but the economy is not growing much above its sustainable long-term pace,” Mr. Dudley said.

While pressures on labor resources are mounting, they are doing so very slowly, he said, pointed out the strength of the USD as another headwind for inflation.

The USD rose 7.1% Vs its peer currencies following the election in November of Donald Trump as President. Mr. Dudley said a strengthening USD should hold big price increases for goods and services in check.

“The recent strengthening of the dollar will put downward pressure on import prices and limit the ability of domestic producers to raise their prices,” said Mr. Dudley, who is a permanent voting member of the FOMC (Federal Open Market Committee), the Fed’s monetary policy setting arm.

The Fed raised its benchmark short-term lending rate in December by a 0.25% to a range of 0.50 to 0.75% and signaled the pace of increases would/could/may accelerate in Y 2017.

Tuesday, the US major stock market indexes finished at: DJIA -58.96 at 19826.90, NAS Comp -35.39 at 5538.72, S&P 500 -6.75 at 2267.89

Volume: trade was heavy with 1.11-B/shares exchanged on the NYSE

  • Russell 2000 -0.3% YTD
  • DJIA+0.3% YTD
  • S&P 500 +1.3% YTD
  • NAS Comp +2.9% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Bullish (0.35) Neutral (0.13) Bullish (0.37) Very Bullish (0.56)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Neutral (0.22) Neutral (-0.11) Bullish (0.42) Bullish (0.35)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Bullish (0.49) Bullish (0.48) Bullish (0.47) Very Bullish (0.53)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Bearish (-0.43) Bearish (-0.34) Very Bearish (-0.58) Bearish (-0.36)

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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