Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Fed FOMC Minutes Show Divisions Over Inflation, QE and Interest Rates

Interest-Rates / US Interest Rates Apr 06, 2011 - 05:04 AM GMT

By: Asha_Bangalore

Interest-Rates

The main message from the minutes of the March 15 FOMC meeting is that policy making will be contentious as the members of the FOMC hold different opinions about inflation and the need to continue the exceptional financial accommodation that is underway.  Although all members agree that the recovery is on a "firmer footing" and the housing sector remains in a slump, their views about inflation were significantly different. 


It was noted that higher prices of oil and other commodities had lifted headline inflation but "underlying inflation remained subdued."  The stability of inflation expectations was reinforcing the view that the recent increase in commodity prices was only "transitory."  Chairman Bernanke reiterated this view on April 4.  He also indicated that inflation and inflation expectations need to be watched closely and if the Fed's current projections are incorrect they would have to take appropriate action.  As Chart 1 shows, inflation measures appear to have bottomed out in late-2010.  But, core inflation remains far from the level associated with the price stability mandate, while higher commodity prices have raised overall inflation measures closer to 2.0%, the "unofficial target." 


 
Inflation expectations are contained, for now (see Chart 2).  However, there was another view that was discussed at the meeting.  Some members "observed that rapidly rising commodity prices posed upside risks to the stability of longer-term inflation expectations, and thus to the outlook for inflation, even as they posed downside risks to the outlook for growth in consumer spending and business investment."


 
In light of recent developments in the global economy, particularly in North Africa and the Middle East, the FOMC noted that the potential for "disruptions" in oil production implies higher oil prices and "upside risks to inflation" and "downside risks to growth." 

A few members of the FOMC also noted that if the public's confidence about the Fed's ability to shrink its balance sheet declines, than it would result in "upward pressure on inflation expectations and so on actual inflation."  In order to alleviate this risk, the FOMC is currently working on exit strategies for alternate scenarios.  The FOMC was divided about timing of the exit, with a few considering a less-accommodative stance in 2011 and others suggesting that the exceptional policy support should continue beyond 2011. 

Differences about the $600 billion asset purchase program were also recorded in the minutes.  Several indicated that they did not anticipate making adjustments to this program, while others indicated that "evidence of stronger recovery, or of higher inflation or rising inflation expectations, could make it appropriate to reduce the pace or overall size of the purchase program."

Chairman Bernanke's remarks on April 4 that he sees the recent hikes in energy and commodity prices as "transitory" and the differences of opinion presented in the minutes suggests that the April 26-27 FOMC meeting will include a spirited debate about the near term path of monetary policy.  

Asha Bangalore — Senior Vice President and Economist

http://www.northerntrust.com
Asha Bangalore is Vice President and Economist at The Northern Trust Company, Chicago. Prior to joining the bank in 1994, she was Consultant to savings and loan institutions and commercial banks at Financial & Economic Strategies Corporation, Chicago.

Copyright © 2011 Asha Bangalore

The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in