The Fed is focused on meeting its dual mandate of price stability and full employment. In this regard, the minutes indicate that the FOMC sees "only a gradual pickup in growth with slow progress toward maximum employment." A few participants held that an upside risk could emerge from a sharp growth in bank lending, given the easy monetary policy stance in place. At the same time, there was a great deal of concern about the housing market, particularly the large supply of unsold homes.

Regarding inflation, it was widely held that "inflation would remain for sometime below levels judged to be consistent, over the longer run, with maximum employment and price stability." Several members indicated that in their opinion the "risk of deflation as having receded somewhat over recent months." The gist of the minutes is largely consistent with the policy statement issued after the meeting. In other words, surprises were not embedded in the minutes. Chairman Bernanke is scheduled to testify on January 7 at the Senate Budget Committee, which should be particularly insightful because the December employment report will be published a few hours prior to the testimony.

Auto Sales Surge in 2010:Q4, Confirms Strong Q4 Consumer Spending and GDP

Auto sales rose to an annual rate of 12.54 million units in December from 12.26 million in November. The fourth quarter average stands at 12.35 million units vs. 11.6 million in the third quarter, which represents a hefty 29% surge compared with an 8.4% increase in the third quarter. These numbers lift fourth real consumer spending and headline real GDP. In sum, the ISM manufacturing survey and auto sales of December suggest improving economic conditions.

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.

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.

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