The Daily Update: FOMC / ECB Inflation Target / Mason Mount

Yesterday we had June’s FOMC statement. The minutes noted that ‘various’ participants felt that the time to start tapering looked likely to be met ‘somewhat earlier than they had expected’ while others saw the incoming data still providing an unclear picture, with ‘several’ of those emphasizing patience was needed in assessing progress and announcing any changes.

The minutes also noted that the committee discussed how to treat mortgage-backed security (MBS) and treasury purchases, however, offered no clear conclusion. Again ‘several’ saw benefits to reducing MBS purchases ‘more quickly or earlier’ than treasury purchases. But ‘several others’ flagged that reducing them ‘commensurately’ (i.e proportionally) is better aligned with the Fed’s strategy.\

With regards to inflation, the minutes recalled that ‘a substantial majority of participants judged that the risks to their inflation projections were tilted to the upside’. However, yet again ‘several other participants’ cautioned that downside risks to inflation remained, owing to the unwinding of temporary price pressures as well as continued weight from forces that held down prices pre-pandemic.\

Also, continuing with inflation, according to a Bloomberg article, the ECB policy makers have agreed to raise their inflation goal to 2% and allow room to overshoot it when needed, officials close to the discussions said. The decision marks a change from the previous target of ‘below, but close to, 2%’ which some policy makers felt was too vague. The consensus for the change has emerged at a special meeting over the last couple of days to conclude the ECB's first strategy review in almost 20 years. The overhauling of the strategy could give officials the justification for sustaining ultra-loose monetary policy for longer as they strive to reverse years of below-target inflation.\

Japanification comes to mind.\

I could not go without saying I hope the ‘Thirty years of hurt never stopped me dreaming’ becomes a thing of the past on Sunday. Also, Mason Mount take a bow. That little girl's face was a picture.