July 13, 2018
In its semi-annual report to Congress, the Federal Reserve is repeating that a further run of gradual rate hikes is in the offing and that monetary policy, despite the funds rate approaching 2 percent and climbing, remains accommodative. The labor market, according to the report, continues to strengthen with greater participation possible for young prime-age workers. The report says higher government spending and tax cuts are giving the economy a moderate boost this year and notes that high oil prices are having less drag on the economy than before. The report also says inflation continues to strengthen. Yet wage growth is described as moderate which the reports attributes to low productivity growth.
The report says consumer spending rebounded in the spring, due in part to the tax cut, but notes that housing has leveled off. Trade policy also finds its way into the report which cites increasing concerns over the global outlook and which it says is weighing on demand for longer-dated Treasuries. On Treasury yields in general, the report attributes the ongoing climb to rising expectations for domestic growth. Fed Chair Jerome Powell will appear before a Senate committee on Tuesday and a House committee on Wednesday.