FAST FIVE: "This Time Is Different": Why Morgan Stanley Expects The Fed To Finally Succeed In Boosting Inflation

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A key reason for the Fed's lack of action is that according to Goldman, the Fed's Summary of Economic Projections is likely to show large upgrades to the growth and unemployment forecasts in recognition of the surprisingly strong data over the last few months, yet not enough for any hawkish surprise: “we expect that the median projection will still show an unemployment rate modestly above the longer-run rate and inflation just below 2% even at the end of the forecast horizon in 2023, a bit short of the conditions that we expect to eventually trigger liftoff.” To some, such as Jefferies chief economist Aneta Markowska, this is a problem: “The market definitely needs more from the Fed now,” she told Bloomberg.

The Fed's New Framework: This Time Is Different On August 27, Chair Powell and the Federal Open Market Committee made history, rolling out a new inflation-targeting framework.

It's not just policy outcomes that are likely to differ.

Would keeping rates at the effective lower bound for that long pose risks to financial stability.

I expect changes to the statement to be cosmetic, intended to align the language with the new framework.

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