Strong growth of Canadian manufacturing sector in April as stock building supports notable uplift in new orders

I supported the Federal Open Market Committee’s (FOMC) decision to hold the federal funds rate at this week’s meeting,1 but I dissented against the FOMC’s action because I did not think it was appropriate to continue to include the following phrase in the policy statement: “In considering the extent and timing of additional adjustments to the target range for the federal funds rate …” While that phrase is not a commitment to make further cuts to the policy rate, it is widely interpreted by Fed watchers to indicate the Committee’s expectation that the next adjustment to the federal funds rate would be a cut. I consider this language a form of forward guidance about the likely direction for monetary policy. Given recent economic and geopolitical developments and the high level of uncertainty about the outlook, I do not believe such forward guidance is appropriate at this time. Instead, the FOMC should offer a policy outlook that signals that the next rate change could be either a cut or a hike, depending on how the economy evolves. Forward guidance is itself an instrument of monetary policy: It can influence financial conditions today, potentially slowing or hastening the achievement of our dual mandate goals. *KASHKARI: FORWARD GUIDANCE IN FOMC STATEMENT NOT APPROPRIATE *KASHKARI: UNANCHORED INFL.EXPECTATIONS WOULD REQUIRE RATE HIKES KASHKARI: FED SHOULD SIGNAL NEXT MOVE MAY BE A HIKE OR CUT KASHKARI STATED THAT BEFORE THE WAR, INFLATION WAS EXPECTED TO DROP, JUSTIFYING ANOTHER RATE CUT THIS YEAR; HOWEVER, MARCH'S EVENTS DID NOT SIGNIFICANTLY CHANGE THE POLICY STATEMENT.

There was a stronger improvement in US manufacturing operating conditions in April, according to the latest PMI® data from S&P Global. Gains in production and order books were the ...