United States: The sin of certainty
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November's FOMC meeting is expected to produce just one thing: a repeat of the Fed's November 2015 announcement when it pre-committed to raising key rates at its following meeting.
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The Fed's intent can already be seen in September's announcements. Statements by the regional presidents of the Chicago and New York Federal Reserve Banks seem to confirm a shift in the FOMC's centre of gravity.
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Wanting its communications to be as transparent as possible, the Fed will continue insisting on its gradual approach to the normalisation of monetary policy. In other words, a December rate increase would not necessarily mark the beginning of a series of rate increases.
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Fine tuning seems to be the Fed's operating mode for the current cycle of rate increases, using a walrasian tâtonnement in order to narrow the gap between the Fed funds rate and the natural rate, without reaching it too quickly. This is no easy task: the natural rate is just as elusive as the output gap and the NAIRU.
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