What I’ll be watching for
Personally, I’ll be looking for any discussion of the risks of not acting and any hints as to how the Fed is reacting to rising inflation. I’ll also be looking at how the Fed expects growth to evolve in the near term. December may still be an option, but increasingly, it will be these two factors, rather than the Fed’s actual mandates of employment and inflation, that will drive policy.
In some respects this is good. The fact that the Fed’s mandate has largely been met can be taken as a sign that monetary policy has actually achieved its goals. On the other hand, the Fed really can’t declare victory until it has normalized policy.
This will be a harder task, and a more delicate one. It will also be more difficult for outsiders to judge; unlike the mandate goals, there are no hard and fast targets for success. We will have to revert to reading the tea leaves, looking between the lines, and trying to second-guess what the Fed really means. In other words, we will have returned to where we were with the Greenspan Fed, famous for “I know you think you understand what you thought I said, but I am not sure you realize what you heard is not what I meant.”
Look forward to substantially more policy uncertainty going forward.
Brad McMillan is the chief investment officer at Commonwealth Financial Network, the nation’s largest privately held independent broker/dealer-RIA. He is the primary spokesperson for Commonwealth’s investment divisions. This post originally appeared on The Independent Market Observer, a daily blog authored by McMillan.