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LAST UPDATE:2/24/2018
CQM 022318 CQM 022318

This week’s CQM updated January import/export prices, housing starts and the effective exchange rate of the U.S. dollar. Although the minutes of the January 31 FOMC meeting forecasts a solid economic recovery, CQM forecasts a “Soft Patch” for 2018Q1. We worry about low growth rates of real GDP on the income side and of real final sales of domestic product and to domestic purchasers. According to the minutes, a couple of participants suggested that the Committee might consider expressing its objective as a range rather than as a point estimate. It is realistic to consider the target of inflation rate as a range such as 0%-2%, not a point of 2%. Monetary policy should be used to prevent inflation (or deflation) from accelerating beyond the range. Policymakers pointed to a number of possible reasons for the difficulty in estimating the link between resource utilization and inflation in recent years. In actuality, the Phillips curve was essentially a wage adjustment function in the labor market.

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