FOMC Minutes: “Love me, love me not”

The Minutes came out. The stock market didn´t appreciate it, at least immediately.

Bernanke´s concept of “open and transparent” monetary policy is really something!

On the Economic Outlook:

Although the incoming data suggested that growth in the second half of 2013 might prove somewhat weaker than many of them had previously anticipated, participants broadly continued to project the pace of economic activity to pick up.

After botching ‘communications’ in May/June of this year, they are now making an effort to be “clear”:

Participants broadly endorsed making the Committee’s communications as simple, clear, and consistent as possible, and discussed ways of doing so. With regard to the asset purchase program, one suggestion was to repeat a set of principles in public communications; for example, participants could emphasize that the program was data dependent, that any reduction in the pace of purchases would depend on both the cumulative progress in labor markets since the start of the program as well as the outlook for future gains, and that a continuing assessment of the efficacy and costs of asset purchases might lead the Committee to decide at some point to change the mix of its policy tools while maintaining a high degree of accommodation.

Given how they´re keen on “expecting” and “anticipating” economic improvement, and how eager to get of the bond buying horse, they say:

Participants reviewed issues specific to the Committee’s asset purchase program. They generally expected that the data would prove consistent with the Committee’s outlook for ongoing improvement in labor market conditions and would thus warrant trimming the pace of purchases in coming months.

Where “coming months” becomes “next month” to markets.

Although they have been saying they expect inflation to move up to target, they considered putting a lower bound to what would be acceptable inflation:

In general, the benefits of adding this kind of quantitative floor for inflation were viewed as uncertain and likely to be rather modest, and communicating it could present challenges, but a few participants remained favorably inclined toward it.

Maybe that´s best. Considering that inflation has been drifting down, if a floor is made official, as long as you are at or only slightly above the floor, the FOMC will feel it has done its job!

2 thoughts on “FOMC Minutes: “Love me, love me not”

  1. Pingback: Fed minutes: “Love me, love me not” | The Corner

  2. Today Bernanke said he was not enamored of QE, as there were risks associated with QE such as “impairing the functioning of securities markets and the extra complexities for the Fed of operating with a much larger balance sheet.”

    I don’t understand any of this. How does the Fed owning a few trillion in bonds impair the functioning of securities markets? And why is the “complexity” of managing a larger balance sheet more than managing a smaller one? Is a larger trading desk needed? A few more accountants?

    Whatever Bernanke’s intentions, in these comments he again raised doubts tat the Fed wants to “stick it out” until we gt robust growth. Add this to a Plosser or a Fisher…and the markets senses a feeble Fed, lacking in resolve towards growth….

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