Today’s Federal Reserve statement is baffling.
They say that “economic growth so far this year has been considerably slower” than they expected and that they see “a deterioration in overall labor market conditions.” They say that “temporary factors…account for only some of the recent weakness.” They note that “inflation picked up earlier in the year” but more recently “has moderated as the prices of energy and some commodities have declined.”
Ask yourself what would happen on opposite planet. Suppose that growth were stronger than expected, and that inflation, after looking low, popped back up. What would the Fed do? Obviously, they would change the stance of policy to head inflation off at the pass. But with growth weakening and inflation moderating, they stand pat. Why?