Tim Duy's Fed Watch

Data Dump

We have seen a steady flow of data the past week, but I can't say that in sum it moves me much from my baseline as described in my last post.  Starting with today's CPI release, Reuters has this to say:

Consumer prices were flat in July for a second straight month and the year-over-year increase was the smallest in more than 1-1/2 years, giving the Federal Reserve room for further monetary easing to tackle stubbornly high unemployment.

I would be a little nervous about reading too much into the drop in headline inflation.  True enough, core edged up just 0.1%, but looking at the year-over-year trends is important at this juncture:

I think the Fed will see the flattening out of core inflation as a sign that the hawk's obsessive fear of exploding inflation was once again proved incorrect.  That said, the opposite is true - even the doves will have a hard time fearing falling inflation unless the shift in headline is confirmed by additional declines in the core.  Yes, you can make the argument that in sum this confirms the Fed's forecast that inflation will remain at or below the 2% target, which in turn justifies additional easing.  If I was on the FOMC, I would make that argument.  But that argument has consistently fallen on the deaf ears of Federal Reserve Chairman Ben Bernanke, who has seen the costs of further easing as outweighing the benefits. Also note that gasoline prices are headed back up, which will reverse some of the recent decline in headline inflation:

While normally I would say the rise in oil/gas costs is a signal of improving demand, in this case I worry that we are seeing a potential supply shock from fears of war in the Middle East.  That said, this is a perpetual fear.

As for the path of inflation overall, I tend to think the cost/risks that Bernanke worries about are overstated, a story that continues to be told in the productivity data:

I just can't get bent out of shape over inflation with unit labor costs growing at anything below 4% a year, and we are well below 4%.  Speaking of the productivity report, remember the 1990's?  Good, hold those memories tight, because it continues to look like they will remain a think of the past:

With the cycle-induced productivity gyrations in the rear-view mirror, it looks like productivity growth is settling into a disappointing rate.  The days of thinking that long-term growth in the US might be 4% in higher are long gone; now we are looking at 2-2.5%.

Despite the generally soft tone of manufacturing surveys - see this morning's Empire Business Report - industrial productive continues to climb:

The surveys tend to be diffusion measures - they don't capture the magnitude of any individual firm declines.  Even if those reporting slower orders exceed those reporting accelerating orders, the latter might still outweigh the former in magnitude.  Thus, overall activity could still climb.  In short, the survey data provides a warning - a warning the Fed has traditionally acted upon - but do not guarantee a broader manufacturing slowdown.

Jobless claims are showing the same pattern as last summer, with an increase beginning in April largely peaking and reversing by August:

 

This would be evidence in favor of Bernanke's stated concerns that the weakness we saw over the summer was at least in part a consequence of seasonal/temporary issues.  In favor of the opposite story is a rise in the inventory to sales ratio:

Looks like firms were caught with a little extra inventory this summer.  To be sure, I would not raise too many red flags just yet.  Notice the similar rise in 2006 that was largely reversed ahead of the recession.  But it is certainly something worth watching.  

Finally, retail sales rebounded in July:

Enough to convince me that the consumer isn't going to plunge us into recession this quarter, but not enough to convince me that the general deceleration in spending is soon to be reversed:

Bottom Line:  The sum total of the data suggests that the Fed's much hoped-for acceleration in growth remains just hope, but that the worst downside fears have yet to be realized.  Inflation continues to remain contained at rates below the Fed's mandate, but will not decline precariously (nor would I expect them to given downward nominal wage rigidities).  There are some warning signs in the data flow, such as manufacturing surveys and inventories, but nothing conclusive.  I want to argue that the failure of the economy to accelerate and below-target inflation, combined with more negative than positive warning signals, argue for additional Fed easing in September.  That, however, has been the case for months, and during that period Bernanke has not moved the Fed to that easing (I tend to see the continuation of Operation Twist as holding the status quo, not additional easing).  And I suspect signs that some of the weakness in the data was temporary will push Bernanke further away from additional easing, especially given his cost/benefit analysis.  On net, I think the outcome of the September FOMC meeting remains a toss-up.  The wild card here is that Bernanke comes up with a new tool.  I think that if he had a mechanism to shift his cost/benefit analysis in favor of further easing, he would jump in that direction.  I just don't think he sees that mechanism yet, and has little faith that additional quantitative easing has more to offer.

US Baseline

Every couple of months I revisit my set of baseline expectations for the US economy.  This helps me gauge the importance of incoming data and events.  This is the bones of the framework I have in mind:

1.)  Overly pessimistic or optimistic forecasts continue to fair poorly.  To be sure, this depends on your definitions of optimistic and pessimistic, but I continue to think the path of GDP growth is notable for its relative stability over recent quarters:

If you avoid getting lost in the twists and turns of the data, you see that growth is hovering around 2% year over year.

2.)  The same story holds for the labor market.  Interestingly, the six and twelve mont month averages for nonfarm payroll gains roughly converged with last months 163k gain: 

With the economy growing at around 2%, payrolls increase around 150k per month.  Not great, by some measures not a disaster.

3.)  I don't expect significant deviations from points one and two in the near-term.  I tend to see the recent spate of weaker data that the Federal Reserve concluded meant:

Information received since the Federal Open Market Committee met in June suggests that economic activity decelerated somewhat over the first half of this year.

as further evidence that the Fed's much-anticipated acceleration is simply not in the cards.  Indeed, the Federal Reserve's June forecasts for GDP growth stood in the 1.9-2.4% and 2.2-2.8% ranges (central tendency) for 2012 and 2013.  I anticipate these will come down a notch in the next forecast.  In other words, the Fed's forecast will be about or slightly above 2% for the next two years.  That acceleration just keeps getting pushed further into the future.

4.) I see multiple reasons to expect soft growth figures.  Government spending is a clear drag:

 

Some of the pent up demand in capital goods and auto spending has been satisfied:

 Deleveraging appears to be continuing in the US:

Consumer spending has slowed: 

In addition, overseas economies, notably Europe and China, are struggling, which is showing up in manufacturing:

I am sure the collected wisdom of the blogosphere can come up with other drags.

5.) From my perspective, housing looks set to support growth.  Low inventories will support higher prices and, eventually, construction.  To be sure, I would be hesitant to get carried away on this point.  Pleny of negatives exist - tighter underwriting standards, shadow inventory, and sustained lower home ownership rates.  And I don't expect the same wealth effect we saw at the height of the housing bubble.  But the momentum appears to be moving in the right direction, which should mean that housing, on average, continues to support growth.  

6.)  I remain concerned that even with housing improving, the stage is set for continued tepid growth, which means a persistent output gap:

 

And poor labor market outcomes, such as a slow decline in the unemployment rate:

 

high long-term unemployment:

 

and low wage growth:

On the upside, temporary hiring continues to grow, which is typically a positive signal:

 7.)  Try as I might, I can't get excited about inflation.  Inflation will continue to drift at or below 2%: 

I don't see sustaining high inflation in the absence of much higher wage growth.  And the economy just will not support such wage growth.  And wage growth itself does not necessarily translate into higher prices.  It could come at the expense of lower profit margins.

8.)  It seems like the risks are generally weighted to the downside.  While Europe may avoid financial collapse, I don't think the economy on the other side of the Atlantic will come surging back anytime soon.  That seems guaranteed by the ongoing efforts to form an "austerity union" in the Eurozone.   Moreover, we seem to face ongoing uncertainty about the path of fiscal policy next year; I believe that a premature tightening of fiscal policy would be ill-advised.  On the upside, the housing market may provide more of a broad-based improvement than my baseline expectations.

9.) The combination of points 1-8 should lead to more aggressive monetary easing.  The economy continues to settle into a path that is not consistent with either part of the Fed's dual mandate.  Moreover, there are very real downside risks to even a tepid outlook. 

10.)  Point 9 has been true for months, and at least three FOMC meetings.  This is frustrating.  What in the world is the point of making a big claim to affirm the nature of the dual mandate and then subsequently ignore any forecasts that indicate you have no faith the elements of the dual mandate will be met anytime soon?  

11.)  There is clear support within the FOMC for additional easing, including open-ended quantitative easing.  This is a postive development.  Some FOMC members would even support a nominal GDP target and/or inflation greater than 2%.  That said, I don't think the center (and certainly the hawks) would support higher inflation targets.  Moreover, I am not yet sure that Federal Reserve Chairman Ben Bernanke is ready to pull the middle to the doves; he seems content to pull the middle to the hawks.  Primarily, this reflects uncertainty about the effectiveness of additional quantitative easing.  There appears to be a push to look for alternatives, perhaps to tools to more directly channel funds to borrowers.  Until Bernanke is willing to accept the need for additional policy, the Fed will remain on hold.   There may or may not be a political element to Bernanke's resistance, despite claims to the contrary.

12.) Bernanke could switch gears by the next meeting, or not until next year, or never, if the data shifts back toward optimistic.  I would like to believe that the doves are sending us a signal that easing is coming soon, but that signal has not been very accurate for the last three meetings. The key is Bernanke, and he seems resistant to additional action until the data turn more decisively downward.  I am not sure that will happen by the September meeting.

This isn't meant to be a complete analysis. To be sure, plenty of details are left out (the numbers are rough estimates), with missing pieces on both sides of the outlook.  Instead, just a skeleton I can put more meat on later.  And something by which to judge incoming data or policy shifts, such as a more aggressive monetary policy.  And something to poke holes in as time goes on.  I can convince myself of more positive and negative outcomes, but still keep coming back to the middle ground.

Tim Duy Smackdown Watch

Peter Coy at Bloomberg notes that I misinterpreted Rosengren on the first point of my last post:

Rosengren did not go quite as far as the Boston Globestory implied—that is, he did not specifically mention election-year pressures. The Globe writers, Steven Syre and Andrew Caffrey, paraphrased Rosengren as saying that the Fed should not worry if further easing is seen as influencing the presidential election. I wrote to them for clarification and Syre responded that “Rosengren’s quote was his response to a question about any potential political controversy around a fed stimulus vote two months before an election.” So it was the reporters who brought up politics, not Rosengren himself. That might seem like a small point, but in the arcane world of Fed politics, it matters. Tim Duy, a University of Oregon economist who blogs on Fed policy, told the Globe, “to pull back the curtain and say, ‘They’re doing this for the election,’ I think is a shift and reflects his level of frustration.” That’s an overstatement of what Rosengren said.

Small, but very important, point to be sure.  Coy could have added "Tim Duy needs to ask better questions." 

I likely jumped at the idea as it is one explanation for Fed inaction given the clear statements by doves calling for more policy in the context of the failure of the Fed to meet its dual mandate.  But while there may be some lingering concerns at the FOMC of the political appearance, the central reason for inaction is likely Federal Reserve Chairman Ben Bernanke's uncertainty of the cost-benefit analysis.  If he thought the benefits outweighed the cost, he could have pulled the FOMC in that direction.  But he hasn't, indicating that he see the costs outweighing the benefits.

Bernanke's cost-benefit analysis is clearly become frustrating to those policymakers who see the issue as more clear cut, like apparently Rosengren.  He now joins San Francisco Federal Reserve President John Williams and Chicago Federal Reserve President Charles Evans in calling for more aggressive policy, including open-ended quantitative easing.  How big that coalition grows between now and September remains to be seen, but the pressure on Bernanke to change course is clearly intensifying.

Is the Election Holding Back the Fed?

Boston Federal Reserve President Eric Rosengren is stepping up his call for additional policy action at the next meeting.  Via the Boston Globe:

Eric Rosengren, the head of the Federal Reserve Bank of Boston, is issuing an unusual public plea to his colleagues in Washington, urging the nation’s central bankers to ignore election-year pressures and do more to jump-start the muddling economy.

Less than a week after Federal Reserve policy makers elected not to take new steps to stimulate the economy, Rosengren in an interview added his voice to a handful of dissenters, saying the central bank has to act at its next meeting in September to revitalize the economy. The Fed should not worry, he said, if the move is seen as influencing the presidential election.

“We don’t get to pick the timing of a global slowdown,” Rosengren said. “If there’s a slowdown and you have an independent central bank, the appropriate response is to act. I think that’s exactly what we should do.”

I have to admit that I was caught off-guard by the direct reference to the presidential election.  I have seen speculation that the Fed is avoiding action until after the election, and this seems almost like an admission of such hesitation.  Is this comment directed at the public, or at his colleagues?  My response:

Some Fed specialists said the remarks from Rosengren are unusually pointed in a world where even the simplest statements are carefully worded. Tim Duy, an economics professor at the University of Oregon who writes a column called Fedwatch on the website Economist’s View, said he was struck, in particular, by Rosengren’s publicly urging the central bank to ignore the political situation.

“That would be fine to say internally. But to say that externally, to pull back the curtain and say, ‘They’re doing this for the election,’ I think is a shift and reflects his level of frustration,” Duy said.

Rosengren then goes further and calls for very aggressive policy:

Rosengren said the economy is just “treading water” and among the actions the Fed committee should consider is a repeat of what the central bank did during the recession when it spent trillions of dollars buying securities. The bond-buying program was controversial, and critics complained it did not help much. But Rosengren said anything more modest than that would probably not be enough. “It would be hard to come up with a program with a big enough impact” without big purchases of securities, he said....

...“Facing a world that’s going to be treading water, monetary policy shouldn’t just stand there and watch it happen,” Rosengren said. “We should start talking about more aggressive policy to make sure we get the kind of growth that’s consistent with improvement in the labor markets.”

Rosengren has been moving in this direction for a few months, but these sound like very pointed remarks, the remarks of someone who is very frustrated with the current stance of policy.  Interestingly, such level of frustration could also be indicative of the strength of opposition to additional quantitative easing within the FOMC.  Indeed, I have long-hypothesized that Federal Reserve Chairman Ben Bernanke could move the middle ground of the FOMC to the doves if he desired, and the fact that he hasn't done so reveals his preference for inaction.  Consequently, the bar to further easing has been higher than believed. That continued inaction in the face of ongoing lackluster economic growth and the persistent failure to meet not just one but both parts of the dual mandate could finally be trying the patience of the FOMC doves.  

Bottom Line:  Who is Rosengren talking to here?  It doesn't sound like he is making a case to the public when he says "[w]e should start talking about more aggressive policy."  It sounds like he is making a case to the rest of the FOMC.  Same with his comments on the election.  At a minimum, he is another voice for aggressive easing.  But such comments sound like he is frustrated with the path of policy, which would signal the strength of the resistance to further easing.  Overcoming that resistance is critical to clearing the path to that easing.

Now we await Bernanke's comments, to see if he gives any ground.    

 

Employment Day Updates

I am on a tight schedule this morning, leaving in a few minutes for a meeting in Salem, so I don't have time for extended comments on this morning's employment report.  The report surprised on the upside, with nonfarm payrolls adding 163k jobs, a clear improvement from the last three months:

On the surface, this would seem to weigh against additional Fed action at their September meeting.  I would say the counterargument is two-fold.  First, wage growth continues to stagnate:

Low wage growth is a consequence of sustained weakness in labor markets and should be seen as further evidence inflation will remain "at or below" levels consistent with the Fed's mandate.  Second, the internals on household survey were weak.  Employment dropped 195k, reducing the employment to population ratio to 58.4, while the ranks of the unemployed grew by 45k.  The labor force participation rate declined further to 63.7, down from 64.0 a year ago.  No progress on the unemployment rate, which edged up a notch.  

The establishment survey argues for a steady hand, the household survey argues for easier policy (arguably, even the establishment survey argues for easier policy, but I don't think the Fed sees it this way).  Also note that we have another employment report before the next meeting.  That said, if I had to choose today, I think that the establishment report would get the upper hand, pointing to steady policy in September.  But there is lots of data between now and then.

For more employment charts, visit Calculated Risk.  Gotta run...

Second Policy Failure of the Week

This week's policy and communication failures of ECB President Mario Draghi border on epic.  It would almost be funny if it wasn't so sad, not just for the ECB, but for the ever-increasing number of unemployed in the Eurozone.  Teetering on the abyss with record high unemployment putting the lie to his claims about the strength of the Eurozone, Draghi chooses to play mind games with financial markets.  This marks a new low in European crisis management.

Who am I kidding?  This doesn't just border on epic.  It is epic.  And one wonders why I have so little confidence.

As is now widely known, last week, in the midst of surging bond yields in the periphery, Draghi delivered some what now appear to be off-the-cuff remarks signaling the ECB was prepared to do whatever it takes to save the Euro.  This was interpretted by market participants as capitulation on the part of the ECB, as it is generally believed that saving the Eurozone, at least with any semblance of economic dignity, requires the ECB to acknowledge its role as lender of last resort for sovereign debt.  This follows naturally from the realization that only the ECB has the firepower to snuff out the debt crisis that engulfs one European nation after another.  

Draghi, however, did not intend to send such a signal, showing a phenomenal lack of cognizance about the fragile state of financial market confidence in Europe.  From the Wall Street Journal live blog:

 

At the conclusion of their meeting today, the ECB failed to meet the unintentionally ramped-up expectations of financial market participants.  Indeed, the ECB did exactly nothing.  No new policies, just vague promises about policies that may or may not be implemented in the future.  On such policies:

The Governing Council extensively discussed the policy options to address the severe malfunctioning in the price formation process in the bond markets of euro area countries. Exceptionally high risk premia are observed in government bond prices in several countries and financial fragmentation hinders the effective working of monetary policy. Risk premia that are related to fears of the reversibility of the euro are unacceptable, and they need to be addressed in a fundamental manner. The euro is irreversible.

This, I think, is critical to understanding the level of support the ECB is willing to provide.  They are not prepared to eliminate default risk by serving as a lender of last resort; they are only willing to eliminate the risk premia associated with a nation's exit from the Euro.  I increasingly think that you can't separate the two, that only by serving as a lender of last resort can you eliminate the exit premia.  But the ECB doesn't see it that way, and as such I suspect is willing to do much less than needed to resolve their end of the crisis.  the more optimisitc interpretation is that Draghi is really just repackaging all the risk premia, default or otherwise, as reversibility risk to limit resistance from the Bundesbank.  See Joseoh Cotterill at FT Alphaville.

Then comes the expected push for more sustained fiscal austerity:

In order to create the fundamental conditions for such risk premia to disappear, policy-makers in the euro area need to push ahead with fiscal consolidation, structural reform and European institution-building with great determination. As implementation takes time and financial markets often only adjust once success becomes clearly visible, governments must stand ready to activate the EFSF/ESM in the bond market when exceptional financial market circumstances and risks to financial stability exist – with strict and effective conditionality in line with the established guidelines.

When all you have is a hammer, everything is a nail.  The ECB will not do anything until European rescue funds are activated under traditional guidelines.  On the role of subsequent role of the ECB:

The adherence of governments to their commitments and the fulfilment by the EFSF/ESM of their role are necessary conditions. The Governing Council, within its mandate to maintain price stability over the medium term and in observance of its independence in determining monetary policy, may undertake outright open market operations of a size adequate to reach its objective. In this context, the concerns of private investors about seniority will be addressed. Furthermore, the Governing Council may consider undertaking further non-standard monetary policy measures according to what is required to repair monetary policy transmission. Over the coming weeks, we will design the appropriate modalities for such policy measures.

Translation, I think:  After the rescue fund is activated, and if the risk premia related to reversibility of the Euro remains high, then and only then will the ECB, reluctantly, buy bonds of affected nations.  It is interesting that they acknowledge the seniority issue.  Here I assume that the ECB intends to signal that they would share in any subsequent debt restructurings.  It seems, however, that this might limit their willingness to buy said bonds, implying a less-than-aggressive response.  

Relatedly, the IMF lends support, via the FT:

Spain is already doing what the International Monetary Fund would demand in return for a bailout, said Christine Lagarde, IMF managing director, in an endorsement of the country’s economic policy.

Her comments both argue that Spain should not need an IMF rescue but also suggest that it might obtain one without much change to its domestic economic policies.

There is speculation that Spain admitted to Germany last week that Spain would need a formal bailout, which would entail a traditional restructuring program.  The IMF is saying that Spain already has such a program in place, and thus could ask for a bailout without fear of embarrassment.  

Of course, one might add that if Spain is doing everything they can, why is the economy still sinking?  Because they are pretending the the traditional IMF medicine of currency devaluation can be substituted one-for-one with internal deflation.  Good luck with that.

Also, if I am reading this correctly, if the ECB will only buy Spanish debt after Spain has asked for and received a EFSF/ESM program, then I think they intend to let the financial crisis engulf Italy until that nation also asks for an EFSF/ESM program.  Is this correct?  Because if it is, it doesn't sound like much of a firewall.  And if they encourage the idea they will only help after the crisis intensifies to the point in which a bailout is necessary, won't such a policy increase the already troublesome financial fragmentation in the Eurozone?  

I will let others assess the economic outlook.  I will leave the first shot for Joe Gagnon:

Yes, insane indeed.

As for the market fallout, the Euro and European equities were generally stronger as the morning progressed, but then plunged as Draghi started talking and the lack of ECB action became evident.  Spanish and Italian equities were particularly hard hit, down more than 5% and 4%, respectively.  Bonds were something of a mixed bag.  Long bonds were pummeled, especially in Spain:

But 2-year Spanish bond extended gains, although at 4.8% are still well above the the 2.5% range seen earlier this year.  I think the message here is that market participants believe Spain can be limped along in the short-run, but there is much less confidence in the long-run.  No surprise, given the devastating impacts of fiscal austerity coupled with a ongoing collapse of the financial system.

Bottom Line:  An epic policy failure by the ECB.  Not only is the ECB willing to let the Eurocrisis simmer for another month, but their communication strategy is abysmal.  Draghi very desperately needs to be more aware of the impact of his comments.  As for the ECB statement, I think it says that the ECB is a second line of defense, and they will act reluctantly only after the EFSF/ESM fund is activated.  This seems to imply a formal bailout request as a precondition to ECB action.  We really need to see more clarification in the weeks ahead about what the ECB sees as the ordering of policy actions in the Eurozone.  The order implied in this statement seems to me like a commitment to continued economic stagnation.  

Manufacturing Update

This morning's ISM manufacturing report was a disappointment with the sector posting a second consecutive modest contraction:

The new orders index stabilized:

but the weight of the global slowdown remains evident in export orders, which extended June's decline:

Slowing orders growth is having an impact on employment growth:

Still, the employment index remains above 50; traditionally, readings below 50 are associated with a response from the Federal Reserve.  This remains one of the indicators arguing for expecting the Fed will continue to stand pat on policy.

Notice that the new import orders index fell sharply:

We are once again flirting with that expansion/contraction line.  I interpret this as indicative that the external slowdown is increasingly feeding through to the domestic economy.  Not enough yet to trigger a recession, but enough to keep a lid on growth.  And that by itself is worrisome given existing anemic growth and the high level of unemployment.

Bottom Line:  The global manufacturing slowdown is increasingly washing up on US shores, but obviously not enough to prompt the Fed into action.  Unfortunately, the risks still seems to remain clearly on the downside, which means that when and if the Fed moves, they will certainly be behind the curve.

First Policy Disappointment of the Week

The Federal Reserve offered no additional easing at the conclusion of their two-day meeting, disappointing market participants who increasingly came to expect fresh monetary action.  The Wall Street Journal is trying to keep hope alive:

The U.S. Federal Reserve signaled more strongly it will take new steps as needed to boost the economy, but held back from immediately starting a new round of bond buying or taking other actions on Wednesday.

Fed officials flagged intensifying concerns over the economic outlook and gave a stronger indication they are moving closer to taking further action as they continue to monitor the fragile recovery. A string of disappointing jobs reports, a sharp slowdown in second-quarter growth and a softening in inflation have fanned expectations that the Fed may step in later this year with new stimulus for the economy.

Maybe next meeting, maybe not. I get the sense that the WSJ's contacts are on the dovish side of late, given the frequent stories that suggest the Fed is about to do more, in contrast to actual Fed inaction.  This dates back to at least the story of "sterilized" QE this spring.  While in the past, I have said to ignore the hawks with regards to monetary policy, now I am thinking you need to ignore the doves as well.  It seems that both camps are caught up in the short-run fluctuations, with the hawks gaining ground on the upswing, and the doves on the downswing, but neither camp can make any traction when year-over-year growth continues to track around 2%:

Of course, one can make the argument that even stable average growth is not enough, and demands more monetary attention.  This seems to be the argument of the doves, although they do not appear to be making it as forcefully inside the Fed as they do in public venues.  But neither hawks or doves matter much at this point.  Federal Reserve Chairman Ben Bernanke is driving this train.  He can bring the middle to the doves if he wanted to.  But he doesn't want to; he is a center-hawk policymaker.  You get the sense that although Bernanke says the Fed can do more, he really believes what they can do is largely ineffective at this point other than increasing inflation risks.  And if they have any effect, they need to be reserved for a clear economic calamity. 

As for September, it is data dependent.  But we need to see some substantially weaker data.  The last six months seems to have proved beyond a shadow of a doubt that the bar to more QE is much higher than could be inferred from the public comments of dovish policymakers.