FOMC two-day meeting with a 2:30 PM Wednesday press conference. I will send a transcript as soon as it becomes available.
“Fed Officials Wrestle With a ‘Dot Plot’ Dilemma. Officials are set to release rate projections on Wednesday, but they have caused confusion.” This morning’s Wall Street Journal article leads with:
Federal Reserve officials aren’t quite sure what to do about their dots.
Every quarter, the central bank produces a chart of 19 officials’ individual projections for interest rates, with a dot representing each person’s expected value of the Fed’s benchmark rate in coming years. Most of them see this so-called dot plot as a valuable communications tool, but it has increasingly contributed to investor confusion.
Officials are set to release an updated dot plot on Wednesday at the end of their two-day meeting. Most appear likely to project either no rate moves or one increase this year, based on recent public statements and interviews.
That would mark a significant change from December, when officials raised rates and the dots showed most officials anticipated between one and three increases this year, with a median projection of two.
The dots have caused problems when the economy is at an inflection point, such as during the current slowdown, because they reflect a baseline outlook—the rate path, if the economy behaves according to each individual’s expectations. The dots don’t show how officials gauge risks to their forecasts.
Officials emphasize the projections don’t represent a rigid rate plan. But the December dot plot rattled many investors who worried the Fed was underestimating the headwinds to growth.
President Trump’s schedule (EDT):
11:30 AM: Receives a briefing on the Economic Report of the President;
12:30 PM: Lunch with Vice President Pence;
1:45 PM: Daily intelligence briefing; and
5:45 PM: Attends a Greek Independence Day Celebration.
TUESDAY: Meets with Brazil’s President Bolsonaro. The two will hold a joint press conference.
WEDNESDAY: Tours the Army Tank Plant at Lima, Ohio;
THURSDAY: Speaks to the Business Roundtable’s Meeting in D.C.
Economic Report of the President to be released today, here.
FY20 Budget details to be released at 11:30 AM today. The “Second Phase” of President Trump’s FY20 Budget, the Appendix, Analytical Perspectives, and Major Savings and Reforms, will be released here.
“Trade Fight With China Enters Overtime, With Tariffs a Costly Sticking Point.” Yesterday’s New York Times article led with:
WASHINGTON — The United States and China are pushing for a summit meeting in late April to complete a trade deal, while negotiators are still grappling over its terms and how they should be enforced.
Although much remains unsettled, one thing is becoming clear: The Trump administration will continue to hold the threat of tariffs over Beijing to ensure that it lives up to whatever commitments it agrees to in the final deal. That approach is prompting concern among American businesses that the economic damage and uncertainty caused by President Trump’s trade war could persist even once negotiations are resolved.
On Friday, a report commissioned by the nation’s biggest business lobbying group showed that the Trump administration’s tariffs are actually damaging an industry the levies were intended to protect. The report, by the U.S. Chamber of Commerce and the Rhodium Group, a research firm, said that Mr. Trump’s tariffs on $250 billion worth of Chinese goods were eroding the competitiveness of the America information technology sector — including companies that manufacture computers, electronics and telecom equipment, as well as provide services like cloud computing, computer-aided design and customer relations.
The report estimated that the tariffs, if they remain in place, would reduce United States gross domestic product by at least $1 trillion within 10 years. The American G.D.P. was about $20.5 trillion in 2018.
Trade negotiations started with Japan and the EU. This morning’s Politico Playbook reports:
In addition to the USMCA and China, Lighthizer is starting separate bilateral negotiations for free-trade agreements with Japan and the European Union, and is in a trilateral negotiation with those countries on WTO rules to tackle Chinese non-market practices.
“The Navy Routinely Buys Defective Ships, Raising Costs and Risks.” This weekend’s CQ Roll Call article led with:
For the U.S. Navy, buying warships that are defective, unfinished or both has become the norm. The habit is expensive, dangerous and leaves overworked sailors to deal with faulty ships in need of repair from day one — yet it has escaped sufficient scrutiny in Washington.
Take the USS Coronado, one of a class of shore-hugging small warships called Littoral Combat Ships. The Navy accepted the Coronado in 2013 even though its system for distinguishing enemy ships and aircraft from friendly ones wasn’t working, according to the Government Accountability Office. What’s more, its radar — designed to guide the launch of missiles against enemy aircraft — was so flawed it could have fired in the wrong direction.
Both deficiencies were identified in testing and were later fixed — but not until months after the Coronado was already in use.
The Coronado also experienced frequent breakdowns in a communications system that connects it with other ships, and that the Navy was unable to repair because parts weren’t available. In addition, a coupling on one of the Coronado’s engines broke while the ship was in transit in the Pacific Ocean, causing the crew to return to port for repairs.
The Navy’s willingness to routinely accept flawed new ships has caused such problems to become common.
… Spokesmen of the two main shipbuilders — General Dynamics Corp. and Huntington Ingalls Industries Inc. — declined to comment. Austal did not respond to requests for comment.
GAO auditors say the Navy has improved in the past decade in fixing the most serious defects on its ships — at least before the fleet actually begins to use them.
“Three-Fifths of This Year’s Deficit is Policymakers’ Fault.” Friday’s Committee for a Responsible Federal Budget’s analysis stated:
The budget deficit will be almost $900 billion this year according to projections from the Congressional Budget Office (CBO). By our estimates, 60 percent of this year’s deficit is the result of legislation passed since 2015 and signed by Presidents Trump and Obama.
While an aging population and rising health costs are responsible for most of the growth in the long-term deficit, high near-term deficits are primarily driven by new tax cuts and spending hikes enacted by the previous two Congresses. Absent this legislation, this year’s budget deficit would have totaled about $360 billion (1.7 percent of Gross Domestic Product) – the lowest since 2007 – rather than $897 billion (4.2 percent of GDP) as CBO projects.
At the top of the business cycle, we should be reducing deficits. There is no deficit reduction in sight, and we are likely to see deficit increases from unpaid for disaster relief and infrastructure bills.
