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Week In Review

FOMC Minutes

This week the Federal Reserve Open Market Committee (FOMC) released the minutes from its September meeting. The minutes show that the Fed remains on track to raise rates in December despite persistently low inflation. According to the minutes, “many participants thought that another increase in the target range later this year was likely to be warranted if the medium-term outlook remained broadly unchanged.” The minutes also detailed a discussion regarding recent weakness in inflation. However, many participants think that softening inflation this year is the result of “idiosyncratic or one-time factors” whose effects will likely fade over time.

Our Take

Although there is concern among some policymakers regarding disappointing inflation data, the committee’s expectation remains that inflation will stabilize near its 2% objective over the medium term. At this point, it appears that rates are likely to increase one more time before the end of the year.


The EU’s chief Brexit negotiator, Michel Barnier, said that talks between the EU and the UK are now deadlocked over the question of the bill that the UK will need to pay upon exit. Barnier said that there will be no discussion of a post-Brexit trade deal or a transitional arrangement until the UK agrees to pay the amount owed to the EU upon exit. The pound declined relative to the euro following Barnier’s remarks.

Our Take

The EU is continuing to take a hard line in negotiations, while May is facing unrest within her own party. While an abrupt and disorderly Brexit is not in any nation’s best interest, politicians on both sides are pushing the outcome in that direction.


Consumer prices rose 0.5% in September, while producer prices rose 0.4%. Year-over-year, consumer prices have risen 2.2% and producer prices are up 2.6%.

Our Take

Energy price increases in the wake of recent hurricanes were the primary driver of higher September inflation. This is likely to moderate over the coming months. Inflation remains subdued.

Retail Sales

Retail sales rose 1.6% in September after falling 0.2% in August.

Our Take

The hurricane effect is distorting retail sales numbers. It may be a couple more months before any real trend in consumer activity can be discerned.


Moody’s Investors Service downgraded Puerto Rico’s general obligation and senior sales tax bonds further into junk territory this week. Moody’s lowered the general obligation debt and senior sales tax ratings from Caa3 to Ca.

Our Take

This week’s downgrade does not come as a surprise. The aftermath of Hurricane Maria has made economic conditions worse in Puerto Rico. Many homes and businesses remain without electricity. Storm damage is still being assessed. An exodus of residents from the island may occur, decreasing the tax base.