Week In Review
This week the Federal Reserve Open Market Committee (FOMC) released the minutes from its January meeting. The minutes supported the Fed’s patient tone put forward after its January meeting and reinforced the committee’s positive outlook for the U.S. economy. For now, policymakers see little risk in leaving interest rates alone while taking time to assess rising risks, including a global slowdown. While some on the committee still argue a need for additional policy action, several members seem comfortable holding off on further rate hikes “unless inflation outcomes were higher than in their baseline outlook.” Of note in the minutes, “almost all participants thought that it would be desirable to announce before too long a plan to stop reducing the Federal Reserve’s asset holdings later this year.”
The Fed may not have ended its run of rate increases, but it has clearly put them on pause. In fact, the Fed appears to be in a neutral position, remaining data dependent to make its next adjustment in rates, which could even be a cut. As for the balance sheet, it appears that quantitative tightening is coming to an end. More details could be coming as soon as the next meeting.
In Wisconsin, the newly elected governor, Democrat Tony Evers, vetoed the first piece of legislation sent to him by the Republican-controlled legislature. The bill called for using state surplus funds to pay for a tax cut.
Prior to the 2018 elections, Republicans controlled both the governorship and legislature in Wisconsin, as well as in Kansas, Michigan, and New Hampshire. This changed in 2018, as each of those states elected a Democratic governor. Those states are likely to see a more contentious legislative process moving forward, which will include debates over state finances.
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