Highlights
The minutes of the FOMC meeting held on October 30-31 indicated that a number of members considered it to be a "close call" whether to cut the fed funds target rate by 25 basis points or to leave the target unchanged.

"In the Committee's discussion of policy for the inter-meeting period, members discussed the relative merits of lowering the target federal funds rate 25 basis points, to 4-1/2 percent, at this meeting or awaiting additional information on prospects for economic activity and inflation before assessing whether a further adjustment in the stance of monetary policy was necessary. Many members noted that this policy decision was a close call. However, on balance, nearly all members supported a 25 basis point reduction in the target federal funds rate. The stance of monetary policy appeared still to be somewhat restrictive, partly because of the effects of tighter credit conditions on aggregate demand. Moreover, most members saw substantial downside risks to the economic outlook and judged that a rate reduction at this meeting would provide valuable additional insurance against an unexpectedly severe weakening in economic activity."

For upside risks, the key concerns were higher oil prices and the decline in the value of the dollar. Higher unit labor costs were also noted as an upside risk.

"Nonetheless, participants expressed concern about the upside risks to the outlook for inflation. The recent increases in the prices of energy and other commodities, along with the significant decline in the foreign exchange value of the dollar, were cited as factors that could exert upward pressure on prices of some core goods and services in the near term."

With the release of these minutes, the Fed started its new "transparency" policy of releasing the FOMC member economic forecasts on a quarterly basis.

The real GDP forecast for 2008 was reduced significantly from the June forecast-from a range of 2.5 - 2.75 in June to a range of 1.8 - 2.5 percent at the October meeting. Much of the slowing was housing related and due to the credit crunch impact on consumer spending. The core PCE price index inflation rate was reduced slightly to a range of 1.7 - 1.9 percent from 1.75 - 2.0 percent. The forecast was the same for 2009 and incrementally lower for 2010. Headline inflation for the PCE price is forecast to come in at 1.8 - 2.1 percent in 2008, compared to 2.9 - 3.0 percent for 2007 and 1.7 - 2.0 for 2009.

Due to slower economic growth, the unemployment rate is expected to rise marginally in 2008.

Overall, the forecast is in line with recent comments by some Fed officials that the economy is in for a "rough patch" in the near term but that monetary policy is about right. Heading into the upcoming FOMC meeting, the Fed will be watching to see if the slowing in the economy is about as they expect. As much as some Fed officials have been outspoken about current policy being OK, the Fed will lose credibility with another rate cut before year end unless dramatic events or data indicate otherwise.

The FOMC next meets December 11.

2007 Release Schedule

Released On: 1/3 2/21 4/11 5/30 7/19 8/28 10/9 11/20 Released For: Dec Jan Mar Apr Jun Jul Sep Oct