The Fed meets this week amid an environment of uncertainty.

The FOMC meets this week still facing several uncertainties. The spread of the virus and subsequent closing of the economy in many parts of the country are the most visible. A more important uncertainty is trying to understand the nature of the U.S. economy post-pandemic. The historic relationships in the economy had been changing even before the pandemic. The inverse correlation between unemployment and inflation (the Phillips Curve) had broken down over the past ten years. Inflation did not increase as unemployment declined to record lows as it had in the past. The savings rate doubled in the ten years following the Great Recession from the ten years before.

 

PROBANK AUSTIN ADVISOR - DECEMBER 14, 2020