The FOMC released its minutes from the December meeting, yesterday. The main thrust of the minutes were this:
- The economy is strong.
- So a 0% to .25% target rate for the federal funds rate sounds about right.
- 2% CPI inflation or bust!
Here’s the full text.
Says HousingWire:
“Labor market conditions have improved further, with strong job gains and a lower unemployment rate. On balance, a range of labor market indicators suggests that underutilization of labor resources continues to diminish. Household spending is rising moderately; recent declines in energy prices have boosted household purchasing power,” the minutes said.
The committee chose to reaffirm its view that the current 0% to .25% target range for the federal funds rate remains appropriate.
The committee will assess progress — both realized and expected — toward its objectives of maximum employment and 2% inflation in order to determine how long to maintain this target range.
In other words, the Fed said nothing new at all in December. Jeff Macke at Yahoo finance suggests that part of the reason for this is that “These are not people for whom conveying ideas comes easily.” This assumes that the members of the FOMC, a group of politicians, is trying very hard to be as honest and genuine as possible. Color me skeptical. For an illustration of this, we need only consult the staff forecast section. There is absolutely zero information contained in this paragraph. The only message here is: Move along. Nothing to see here. Everything is proceeding according to plan:
The staff’s outlook for economic activity over the first half of 2015 was revised up since December, in part reflecting an anticipated boost to consumer spending from declines in energy prices. However, the forecast for real GDP growth over the medium term was little revised, as the greater momentum implied by recent spending gains and the support to household spending from lower energy prices was about offset by the restraint implied by the recent appreciation of the dollar. The staff continued to forecast that real GDP would expand at a modestly faster pace in 2015 and 2016 than it did in 2014 and that it would rise more quickly than potential output, supported by increases in consumer and business confidence and a pickup in foreign economic growth, as well as by a U.S. monetary policy stance that was assumed to remain highly accommodative for some time. In 2017, real GDP growth was projected to begin slowing toward, but to remain slightly above, the rate of growth of potential output. The expansion in economic activity over the medium term was anticipated to lead to a slow reduction in resource slack, and the unemployment rate was expected to decline gradually and to move slightly below the staff’s estimate of its longer-run natural rate for a time.