At their December 2017 policy meeting, the FOMC majority voted to increase the monetary policy targets (RRP & IOER) by an additional 25 bps. It was the fifth such move dating back to December 2015. It was not, however, a unanimous decision. Chicago Fed President Charles Evans and Minneapolis Fed President Neel Kashkari both opposed the “rate hike.”

At a news conference in January, Evans tried to explain his objections to the media. He said, bluntly, what any rational person would have been thinking for years. “I’d feel a lot more confident if I saw those transitory reductions in the inflation rate go away.”

While most other Fed policymakers believe that those conditions will help boost inflation this year, justifying continued rate hikes, Evans said he has seen that forecast for several years running and it has not panned out.

In other words, if you keep blaming “transitory” factors for missing your explicit inflation target year after year after year, eventually even your fellow Economists are going to suspect something’s up. BOND ROUTS!!!! aside, they are clearly missing a big part of the equation.

For Kashkari, his latest views on the labor situation are similar to Evan’s relatively mild criticisms. They both might be summed up as, where is it? As I write often, eventually the boom has to boom. Taking particular notice of the Wall Street Journal’s penchant for writing about the LABOR SHORTAGE!!!, he asked just that question:

You can talk around the matter even for a very long time, but small “e” economics is unflinching. If there is a question about a labor shortage, wage growth would definitively settle the matter. And wages have definitively settled it, just not in the way the majority would like. They don’t seem to care either way (“data dependent” has become just as fungible as “transitory”).

The latest Beige Book compendium released yesterday included only seven mentions of “labor shortage” this time, down slightly from prior versions. One of them again highlights the absurdity of monetary policy devoid of any money constraint (including knowledge):

Businesses were responding to labor shortages in a variety of ways, from raising pay to enhancing training to increasing their use of overtime and/or automation, among other strategies. Upward wage pressures persisted but generally did not escalate; most Districts reported wage growth as only modest.

This one passage tells us a lot, not about inflation but of what’s going on internal to these deliberations. This first part is contradicted by the second. Why are both included anyway? Factions have emerged inside the policy apparatus, a wonderful treat left for Jerome Powell from Janet Yellen.

This defect, as it were, was neatly handled before the transition, however. Perhaps it was the last element of inflation hysteria, where the markets during that period didn’t so much believe as the Fed about its forecasts for economy and prices, rather they believed the Fed believed in its own numbers. Dissent and more so the reasons for it were definitively swept aside.

Unlike the one before, the last “rate hike” in March 2018 was unanimous. Charles Evans and Neel Kashkari both rotated off as voting members starting in January (Evans remains as an alternate). I suspect there remains serious opposition, the Beige Book tells us that much. It just doesn’t have a vote any longer.

In keeping with the spirit of the current times, hawkish is nothing more than ¯\_(ツ)_/¯.