April 30th FOMC Minutes
FOMC Minutes reveal... the Fed clearly admits:
all the cuts, auctions and facilitation of bad paper at the window, has done nothing to date...
it is caught between a rock (risks to growth) and a hard place (risks to inflation)...
and rather than actual inflation itself, the public's inflation expectations are the key to upside risk.
Read on if you dare...
Staff projection pointed to a contraction of real GDP in the first half of 2008...
many participants judging that real GDP was likely to contract slightly in the first half of 2008.
in light of the further run-up in energy prices and somewhat higher food price inflation...
participants expected the recent increases in oil and food prices to continue to boost overall consumer price inflation in the near term;
The possibility that inflation expectations could increase was viewed as a key upside risk to the inflation outlook.
Financial markets remained under considerable stress, noted that the functioning of many markets remained impaired,
and expressed concern that some of the recent recovery in markets could prove fragile.
Strains in short-term funding markets had intensified over the intermeeting period,
in part reflecting continuing pressures on the liquidity positions of financial institutions.
financial headwinds would probably continue to restrain economic activity through much of next year.
the likelihood that the functioning of the financial system would deteriorate substantially further
with significant adverse implications for the economic outlook was judged by participants to have receded somewhat.
Labor demand continued to weaken in March... The reduction in jobs was again widespread.
Growth in consumer spending appeared to have slowed to a crawl... For the quarter as a whole, real expenditures on both durable and nondurable goods declined.
In the business sector, real spending on equipment and software contracted. The outlook for business spending remained decidedly downbeat.
the pace of activity in the rest of the world could slow in coming quarters, suggesting that the impetus provided from net exports might well diminish.
Residential construction continued its rapid contraction in the first quarter...
the demand for commercial properties had fallen off substantially from record levels last year, and commercial property prices appeared to be decelerating.
participants saw little indication of a bottoming out in either housing activity or prices.
the outlook for the housing market remained bleak, with housing demand likely to be affected by
restrictive conditions in mortgage markets, fears that house prices would fall further, and weakening labor markets.
The possibility that house prices could decline by more than anticipated, and that the effects of such a decline
could be amplified through their impact on financial institutions and financial markets,
remained a key source of downside risk to participants' projections for economic growth.
The pressure on households' real incomes from higher energy prices and the erosion of wealth
resulting from continuing declines in house prices likely contributed to the deceleration in consumer outlays.
The restraint on spending emanating from weakness in labor markets was expected to increase over coming quarters,
with participants projecting the unemployment rate to pick up further this year and to remain elevated in 2009.
participants expressed the view that the easing in monetary policy since last fall had not as yet led to a loosening in overall financial conditions,
but rather had prevented financial conditions from tightening as much as they otherwise would have in response to escalating strains in financial markets.
In light of these significant policy actions, the risks to growth were now thought to be more closely balanced by the risks to inflation.
Accordingly, the Committee felt that it was no longer appropriate for the statement to emphasize the downside risks to growth.
all the cuts, auctions and facilitation of bad paper at the window, has done nothing to date...
it is caught between a rock (risks to growth) and a hard place (risks to inflation)...
and rather than actual inflation itself, the public's inflation expectations are the key to upside risk.
Read on if you dare...
Staff projection pointed to a contraction of real GDP in the first half of 2008...
many participants judging that real GDP was likely to contract slightly in the first half of 2008.
in light of the further run-up in energy prices and somewhat higher food price inflation...
participants expected the recent increases in oil and food prices to continue to boost overall consumer price inflation in the near term;
The possibility that inflation expectations could increase was viewed as a key upside risk to the inflation outlook.
Financial markets remained under considerable stress, noted that the functioning of many markets remained impaired,
and expressed concern that some of the recent recovery in markets could prove fragile.
Strains in short-term funding markets had intensified over the intermeeting period,
in part reflecting continuing pressures on the liquidity positions of financial institutions.
financial headwinds would probably continue to restrain economic activity through much of next year.
the likelihood that the functioning of the financial system would deteriorate substantially further
with significant adverse implications for the economic outlook was judged by participants to have receded somewhat.
Labor demand continued to weaken in March... The reduction in jobs was again widespread.
Growth in consumer spending appeared to have slowed to a crawl... For the quarter as a whole, real expenditures on both durable and nondurable goods declined.
In the business sector, real spending on equipment and software contracted. The outlook for business spending remained decidedly downbeat.
the pace of activity in the rest of the world could slow in coming quarters, suggesting that the impetus provided from net exports might well diminish.
Residential construction continued its rapid contraction in the first quarter...
the demand for commercial properties had fallen off substantially from record levels last year, and commercial property prices appeared to be decelerating.
participants saw little indication of a bottoming out in either housing activity or prices.
the outlook for the housing market remained bleak, with housing demand likely to be affected by
restrictive conditions in mortgage markets, fears that house prices would fall further, and weakening labor markets.
The possibility that house prices could decline by more than anticipated, and that the effects of such a decline
could be amplified through their impact on financial institutions and financial markets,
remained a key source of downside risk to participants' projections for economic growth.
The pressure on households' real incomes from higher energy prices and the erosion of wealth
resulting from continuing declines in house prices likely contributed to the deceleration in consumer outlays.
The restraint on spending emanating from weakness in labor markets was expected to increase over coming quarters,
with participants projecting the unemployment rate to pick up further this year and to remain elevated in 2009.
participants expressed the view that the easing in monetary policy since last fall had not as yet led to a loosening in overall financial conditions,
but rather had prevented financial conditions from tightening as much as they otherwise would have in response to escalating strains in financial markets.
In light of these significant policy actions, the risks to growth were now thought to be more closely balanced by the risks to inflation.
Accordingly, the Committee felt that it was no longer appropriate for the statement to emphasize the downside risks to growth.
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