Warsh Uses Fed Task Forces to Reevaluate Inflation, Productivity, and JobsView all comments (0)0The big news this week is the Federal Open Market Committee (FOMC) statement under new Fed Chairman Kevin Warsh. After better-than-expected core inflation announcements for the CPI and PPI, I was hoping that the Fed would telegraph that inflation has been transitory and predominantly related to high crude oil prices. Although the FOMC did not change key interest rates as expected, unfortunately, 9 of the 19 FOMC members in their “dot plot” forecasted a 0.25% key interest rate hike. It is perceived that Warsh wants to “button up” the Fed to better control commentary. In the meantime, Warsh’s first job is to build a consensus on the FOMC, so it may take Warsh some time to reel in many FOMC members who like to chat with the media. Due to the fact that market rates have declined a bit and might fall further as energy prices fizzle, I am still holding out for a Fed key interest rate cut later this year, but I am in a small minority. Warsh confirmed that the Fed’s forward guidance has been dropped, which is his first big stamp on the FOMC.Chairman Warsh’s press conference was impressive. He made it clear that the Fed is re-evaluating the economic data that the FOMC monitors. Interestingly, Warsh talked about a task force reevaluating productivity and its impact on jobs. Additionally, Warsh talked about a task force evaluating how an inflation framework is evaluated and to dig into the real catalysts for inflation. So, it is very clear that Warsh tends to use these task forces with the Fed to change the narrative, better forecast inflation, and to monitor productivity gains that are not inflationary. It will take time for Warsh to change the Fed narrative, so he is starting on the staff level, and a new narrative may start showing up in upcoming Beige Book surveys.Crude oil prices have now declined to pre-war levels in the wake of President Trump signing a Memorandum of Understanding with Iran, effectively reopening the Strait of Hormuz. The U.S. Navy’s blockade of Iran’s ports has been lifted. The U.S. will continue to negotiate with Iran over the next 60 days. Before investors get too excited, there is a debate about how quickly these crude oil shipments can replenish the steep decline in oil stockpiles. Bloomberg reported that the Trump Administration is planning to authorize the release of 172 million barrels of crude oil from the Strategic Petroleum Reserve, which will leave it with only 243 million barrels, or a third of its overall capacity. An Energy Department spokesman said it will refill the Strategic Petroleum Reserve with approximately 200 million barrels within the next year. The Energy Information Agency on Wednesday announced that crude oil inventories declined 8.3 million barrels in the latest week, which was larger than the 7.2 million drawdown in the previous week, so we are in the midst of peak summertime demand.Meanwhile, Apple (AAPL) is raising the price of some of its products due to rising memory. Micron Technology (MU) is forecasted to announce 271.2% revenue growth and 932.6% earnings growth. The analyst community continues to revise Micron Technology’s earnings estimates higher, so I am expecting a big earnings surprise in the upcoming days.Warsh Uses Fed Task Forces to Reevaluate Inflation, Productivity, and JobsView all comments (0)0