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21 May 2014
Fed focused on the QE exit but no conclusion yet
FXStreet (San Francisco) - The Federal Reserve released the FOMC April 30 meeting minutes where the central bank shows that members are focused on bond-buy exit but they didn't reach conclusion yet. Meanwhile, the Board favors the testing of tools for normalization, such as reverse repo, Ioer and term deposit plan.
The FOMC saw no inflation risk in fueling job growth; risks to economy are 'nearly balanced while no significant financial system risk;' however the board discussed tools for 'normalization' of policy risks of Chinese slowdown as well as they noted the US housing slowdown.
The Fed expects inflation at 2% in a few years and few participants feel the Fed should be clearer about its approach to an eventual rate hike.
Overall, Fed officials pointed outlook did not change materially from March meeting Minutes.
Main quotes:
In their discussion of the economic situation and the outlook, meeting participants generally indicated that their assessment of the economic outlook had not changed materially since the March meeting.
Severe winter weather had contributed to a sharp slowing in activity during the first quarter, but recent indicators pointed to a rebound and suggested that the economy had returned to a trajectory of moderate growth.
However, some participants remarked that it was too early to confirm that the bounceback in economic activity would put the economy on a path of sustained above-trend economic growth.
Most participants commented on the continuing weakness in housing activity. They saw a range of factors affecting the housing market, including higher home prices, construction bottlenecks stemming from a scarcity of labor and harsh winter weather, input cost pressures, or a shortage in the supply of available lots.
Most participants expected inflation to return to 2 percent within the next few years, supported by highly accommodative monetary policy, stable inflation expectations, and a continued gradual recovery in economic activity. However, a few others expressed the concern that the return to 2 percent inflation could be even more gradual.
The FOMC saw no inflation risk in fueling job growth; risks to economy are 'nearly balanced while no significant financial system risk;' however the board discussed tools for 'normalization' of policy risks of Chinese slowdown as well as they noted the US housing slowdown.
The Fed expects inflation at 2% in a few years and few participants feel the Fed should be clearer about its approach to an eventual rate hike.
Overall, Fed officials pointed outlook did not change materially from March meeting Minutes.
Main quotes:
In their discussion of the economic situation and the outlook, meeting participants generally indicated that their assessment of the economic outlook had not changed materially since the March meeting.
Severe winter weather had contributed to a sharp slowing in activity during the first quarter, but recent indicators pointed to a rebound and suggested that the economy had returned to a trajectory of moderate growth.
However, some participants remarked that it was too early to confirm that the bounceback in economic activity would put the economy on a path of sustained above-trend economic growth.
Most participants commented on the continuing weakness in housing activity. They saw a range of factors affecting the housing market, including higher home prices, construction bottlenecks stemming from a scarcity of labor and harsh winter weather, input cost pressures, or a shortage in the supply of available lots.
Most participants expected inflation to return to 2 percent within the next few years, supported by highly accommodative monetary policy, stable inflation expectations, and a continued gradual recovery in economic activity. However, a few others expressed the concern that the return to 2 percent inflation could be even more gradual.