FOMC Minutes

May 21, 2014

Released minutes from the April 29-30th meeting read dovishly and reveal

  • No inclination to begin raising the federal funds rate for at least 4-5 more quarters.
  • Satisfaction that maintaining the present accommodative policy will create a conflict between the Fed’s inflation and employment mandates for quite some time longer.
  • No substantial changes since the prior meeting in the economic outlook.  Part of the first-quarter weakness was not weather-related, but 2Q is shaping up more or less as assumed.  Faster growth is projected in the next few years than the 2.3% pace between 1Q13 and 1Q14, and that would be a desirable development that wouldn’t create an inflation problem.
  • Housing and net foreign demand haven’t developed quite as well as assumed previously.
  • Justification for stronger future growth rests on the assumptions of less fiscal constraint, better consumer and business confidence, a further improvement in financial market conditions including the availability of credit, and healthier demand growth in U.S. export markets.
  • More members seem fixated on disinflation than inflation.  With slack labor and product markets, more think inflation might normalize to 2% more slowly assumed than more quickly.
  • There is some uneasiness that persistent sub-2% inflation could depress longer-term price expectations.
  • Financial conditions hadn’t improved since the prior meeting and remain vulnerable if there were to be a new shock.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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