My Fancy-Schmancy “Fed Hawk-o-Meter” Jumps 18%, “Patient” Gets Slashed, “Moderated” Disappears
My Fancy-Schmancy “Fed Hawk-o-Meter” Jumps 18%, “Patient” Gets Slashed, “Moderated” Disappears by Wolf Richter for Wolf Street
What’s the Fed Trying to Say?
My fancy-schmancy Fed Hawk-o-Meter jumped 18% from 22 to 26, after having been on a downtrend for four Fed meetings in a row. Something’s up.
The Fed Hawk-o-Meter checks the minutes of the FOMC meetings for signs that the Fed sees the economy as strong and that rates should rise; or that the economy is OK but not strong enough to raise rates further; or that the economy is spiraling down to where rates need to be cut. It quantifies and visualizes what the Fed wishes to communicate to the markets by counting how often “strong,” “strongly,” and “stronger” appear in the minutes to describe the economy. In the minutes of the March 19-20 meeting, released this afternoon, those words appear 26 times, up 18% from 22 times in the prior minutes:
The average frequency per meeting minutes of “strong,” “strongly,” and “stronger” between January 2013 and December 2017 was 8.7 times. The 26 mentions in the March-meeting minutes were 226% the pre-redline average.
The 18% jump in the March minutes from the January minutes is particularly striking because the Fed had spent the prior four meetings backing off ever so gingerly its bullish assessment of the economy. But in March, the direction changed.
Yet the reading still hasn’t jumped back to the peak levels of last August, when the Fed, with the economy running red hot, was telling the markets that it would raise rates four times in the year.
The current reading of 26 is just above the average over the past 11 meetings minutes of 25.2, starting with the December 2017 meeting, when the Hawk-o-Meter started redlining.
“Strong,” “strongly,” and “stronger” appeared in phrases like these:
- “Labor market conditions remained strong…”
- “Relatively strong increases in real federal defense purchases…”
- “Gross issuance of both investment-grade and high-yield corporate bonds was strong…”