Cruisin’ With The Fed

The Federal Reserve is on autopilot. Minutes from the May 6-7 meeting said FOMC members noted that “economic activity had continued to expand at a solid pace and labor market conditions continued to be solid.”

This might sound surprising given the fact that the notes also revealed concern and discussion about rising Treasury yields, U.S. dollar depreciation against other currencies, heightened volatility in the equity markets, negative effects of tariffs on the supply chain and international trade, potentially worsening inflation, and lots of uncertainty.

In the face of a long list of duly noted concerns, the Fed still found itself trumpeting a familiar refrain regarding economic activity…

“Even as the U.S. dollar declined and the Treasury yield curve steepened, the Federal Reserve remained adamant that economic activity and the labor market remained strong and policy intervention was unnecessary, according to the minutes of the May Federal Open Market Committee meeting. – (Kitco News)

It is somewhat hard to believe that economic activity and the labor markets weren’t affected by all of the negative factors listed above.  They were, of course; but some of those negative effects won’t show up until later.

Also, as is normally the case, a good deal of negativity is ignored or downplayed when the final assessment is made. I mean, can you imagine the havoc that would ensue if we heard something like this:

“Recent indicators suggest that economic activity continues to decline and the pace of that decline is steepening. Rather than growing, it is clear that the economy is shrinking and that the rapid descent into recession may quickly turn into an economic depression that could last for years. Labor markets are in turmoil with company closures, layoffs, and skyrocketing unemployment.”

This leads us back to our opening statement “The Federal Reserve is on autopilot.”. Here are some previous statements regarding economic activity and the labor markets…

March 2025 FOMC summary notes: “The economy was described as ‘healthy’ despite negative sentiment, with the labor market remaining strong.” 4

January 2025 from FOMC notes and Chair Powell’s press conference transcript:

“Recent indicators suggest that economic activity has continued to expand at a solid pace. … Labor market conditions have cooled from their formerly overheated state and remain solid.” 1 2 4

IN A RUT 

Sometimes autopilot can sound like a broken record. Here are some examples of similar statements from previous Federal Open Market Committee (FOMC) meeting notes:

1. January 2020 FOMC Statement: “Economic activity has been rising at a moderate rate… Labor market conditions remain strong.”

2. December 2019 FOMC Statement: “Economic activity has been rising at a moderate rate… Labor market conditions remain strong.“

3. September 2019 FOMC Statement: “Economic activity has been rising at a moderate rate… The labor market remains strong.“

4. June 2019 FOMC Statement: “Economic activity is rising at a moderate rate… Labor market conditions remain strong.”

5. May 2019 FOMC Minutes: “Economic activity appeared to be expanding at a solid pace… Labor market conditions remained strong.”

SUMMARY 

The FOMC’s consistent use of positive descriptive summaries about the economy and the labor markets is intentional and not likely to change. Actually, in light of the above references, we can call it boilerplate.

Boilerplate text, or simply boilerplate, is any written text (copy) that can be reused in new contexts or applications without significant changes to the original. The term is used about statements, contracts, and source code, and is often used pejoratively to refer to clichéd or unoriginal writing.

That might be okay if the Fed had a better track record when it comes to avoiding economic catastrophe. As it is, investors and others are blindsided from economic reality until the negativity hits them squarely in the face.

(also see Tariffs Are Not Inflationary and Bare Naked Facts About Fed Independence)

Kelsey Williams is the author of two books: INFLATION, WHAT IT IS, WHAT IT ISN’T, AND WHO’S RESPONSIBLE FOR IT and ALL HAIL THE FED

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