On December 14, 2004, the Federal Open Market Committee announced that they would release the minutes of each meeting with a three week lag. This is a vast improvement from the previous release of the minutes which ranged from a six to eight week lag. While the FOMC releases a statement after each meeting which describes the policy action (or inaction), the minutes generate a lot of attention in the financial markets because they reveal more details on the discussion of the most recent FOMC meeting. Why Investors Care
Highlights
Policy makers at the Federal Reserve are focused squarely on market troubles and troubles in the economy, the conclusion from the late January FOMC minutes which produced a 50 basis point rate cut and raised expectations for more. Expressing concern that GDP and the labor market may slow more than expected, FOMC members agreed at the meeting that further easing, and significant easing, could well be needed.
But inflation may be getting away from the Fed which, in economic projections issued along with the minutes, is forecasting a 2.0 to 2.2 percent range for core PCE inflation, a rate at least 2 tenths above their historic comfort zone and one noticeably below the 2.5 percent core CPI level posted just this morning. Policy makers in fact did concede that there is a risk inflation expectations could start to rise, an assessment unfortunately supported by last week's University of Michigan consumer sentiment report that showed a sudden 3 tenth jump in 1-year inflation expectations.
One of the big surprises in the minutes is the Fed's GDP projection, at 1.3 to 2.0 percent -- a range that's a full 5 tenths lower than their prior projection. Today's minutes didn't have much immediate impact on the financial markets, but they do show that the FOMC is clearly focused on the risk to economic growth and, with inflation a secondary concern, are set on a path of aggressive accommodation.
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