Author: Zac Martin, Senior Investment Analyst
Week Ending March 20th – Terms From the 70s
Federal Reserve & Inflation: The FOMC met on Wednesday to discuss the Federal Reserve’s interest rate policy and their economic projections that may influence future rate decisions. Before their meeting the BLS released the Producer’s Price Index (an inflation report) which surprised analyst to the upside, increasing 3.4% v. the expectation of 2.9%. Notably, this report is for February, before the Iran Conflict, and energy prices contributed to most of the increase. The Federal Reserve opted to not change the Federal Funds rate, citing concerns about inflation reaccelerating, while dismissing stagflation as a current concern. Indeed, Fed Chair Jerome Powell called stagflation: "I reserve stagflation for that -- the word -- for that period. Maybe that's just me." Additionally, the Committee raised their forward projections for both Real GDP and inflation as the economy remains in expansion. Below is a summary table of the FOMC's projections (Source).
Leading Indicators & PMIs: Purchasing Managers Indexes (or PMI’s) have generally moved higher over the last month. ISM manufacturing PMI has moved into expansion from contraction for two consecutive months, previously this has been in contraction for the last three years. Additionally, regional PMI’s have reported a more positive future outlook for manufacturing businesses. Generally, this recent “jump” has been due to an increase in new orders. This recent increase in positive manufacturing sentiment has also not been affected by the recent geopolitical developments.
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