FOMC minutes

The Federal Open Market Committee (FOMC) minutes of the Sept 21st 2010 meeting are worth reading. Below are some bullet points:

  • roughly $28 billion principal payments were reinvested into Treasuries with maturities between 2-10 years. Mostly nominal, but a little into TIPS
  • continuing to operate the reverse repo and term deposit facilities on a light scale for ‘down-the-road’ withdrawal of accommodation
  • economy expanding at a weakening pace – but data is inconsistent
  • housing awful
  • labor not much better
  • deflation not likely – but inflation well below acceptable levels per FOMC’s dual mandate
  • unit labor costs and hour compensation very very low
  • lots of mortgage refis .. but some homeowners cannot get a refi due to negative equity
  • a double dip is not likely – but slow growth is likely
  • if economic growth remains too slow, unemployment remains too high, or inflation levels too low, more accommodation is coming. seems like all of these are likely, thus more accommodation is coming!
  • most likely form of more accommodation –> longer-term Treasury purchases (thinking 2-10s) and potential statement of inflation target
  • Hoenig has gone off the deep end. He actually wants to raise rates and shrink the balance sheet. Speechless.
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