Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Stock Market Final Thrust Review - 19th Jan 20
Gold Trade Usage & Price Effect - 19th Jan 20
Stock Market Trend Forecast 2020 - Trend Analysis - Video - 19th Jan 20
Stock Trade-of-the-Week: Dorchester Minerals (DMLP) - 19th Jan 20
INTEL (INTC) Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 18th Jan 20
Gold Stocks Wavering - 18th Jan 20
Best Amazon iPhone Case Fits 6s, 7, 8 by Toovren Review - 18th Jan 20
1. GOOGLE (Alphabet) - Primary AI Tech Stock For Investing 2020 - 17th Jan 20
ERY Energy Bear Continues Basing Setup – Breakout Expected Near January 24th - 17th Jan 20
What Expiring Stock and Commodity Market Bubbles Look Like - 17th Jan 20
Platinum Breaks $1000 On Big Rally - What's Next Forecast - 17th Jan 20
Precious Metals Set to Keep Powering Ahead - 17th Jan 20
Stock Market and the US Presidential Election Cycle  - 16th Jan 20
Shifting Undercurrents In The US Stock Market - 16th Jan 20
America 2020 – YEAR OF LIVING DANGEROUSLY (PART TWO) - 16th Jan 20
Yes, China Is a Currency Manipulator – And the U.S. Banking System Is a Metals Manipulator - 16th Jan 20
MICROSOFT Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 15th Jan 20
Silver Traders Big Trend Analysis – Part II - 15th Jan 20
Silver Short-Term Pullback Before Acceleration Higher - 15th Jan 20
Gold Overall Outlook Is 'Strongly Bullish' - 15th Jan 20
AMD is Killing Intel - Best CPU's For 2020! Ryzen 3900x, 3950x, 3960x Budget, to High End Systems - 15th Jan 20
The Importance Of Keeping Invoices Up To Date - 15th Jan 20
Stock Market Elliott Wave Analysis 2020 - 14th Jan 20
Walmart Has Made a Genius Move to Beat Amazon - 14th Jan 20
Deep State 2020 – A Year Of Living Dangerously! - 14th Jan 20
The End of College Is Near - 14th Jan 20
AI Stocks Investing 2020 to Profit from the Machine Intelligence Mega-trend - Video - 14th Jan 20
Stock Market Final Thrust - 14th Jan 20
British Pound GBP Trend Forecast Review - 13th Jan 20
Trumpism Stock Market and the crisis in American social equality - 13th Jan 20
Silver Investors Big Trend Analysis for – Part I - 13th Jan 20
Craig Hemke Gold & Silver 2020 Prediction, Slams Biased Gold Naysayers - 13th Jan 20
AMAZON Stock Investing in AI Machine Intelligence Mega-trend 2020 and Beyond - 11th Jan 20
Gold Price Reacting to Global Flash Points - 11th Jan 20
Land Rover Discovery Sport 2020 - What You Need to Know Before Buying - 11th Jan 20
Gold Buying Precarious - 11th Jan 20
The Crazy Stock Market Train to Bull Eternity - 11th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

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.


© 2005-2019 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

6 Critical Money Making Rules