Analysts at Nomura noted the Fed speakers today.
“At a roundtable meeting with local business leaders in Plattsburgh, New York, this morning, Federal Reserve Bank of New York President William Dudley displayed his confidence in the FOMC’s rate hike path in addition to acknowledging continued growth in the economy. One of the FOMC’s important messages from the June meeting was that the Committee was not unnerved by recent downside surprises in inflation or underperformance of some economic indicators in recent months.”
“Chair Yellen indicated the Committee’s view that the recent weakness in inflation was attributable to one-off price reductions in certain categories. Consistent with this message, the FOMC’s median forecasts for core PCE inflation in 2017 were lowered, but those for 2018, 2019, and the longer-run remained unchanged.”
“Given that the FOMC median forecast for the unemployment rate was lowered for 2017, 2018, 2019 and the longer-run, it is possible that the FOMC responded to the weak inflation data by accepting a more substantial and sustained undershoot of the unemployment rate. Affirming this interpretation is President Dudley’s indication today that he expects faster wage growth as labor market tightens, which may boost inflation to some degree. His comments appear in line with the Committee’s relatively hawkish stance as implied by its view on the future path of interest rates.”