Minutes from the Jan FOMC meeting said the “economic recovery was firming, though the expansion had not yet been sufficient to bring about a significant improvement in labor market conditions.” They talked of a strong rise in consumer spending late ’10 and the continued expansion on spending on equipment and software. Residential and non residential construction remained weak, industrial production increased solidly and modest gains in employment continued.” On inflation, they say “Despite further increases in commodity prices, measures of underlying inflation remained subdued and longer run inflation expectations were stable.” Wage pressures were “still restrained.” They raised their ’11 GDP forecast and tightened their benign inflation expectation. Looking past ’11 for a Fed outlook, which they gave, is worthless info I believe as their forecasting ability should not be paid attention to.

With respect to their desire to further increase the Fed balance sheet, notwithstanding their acknowledgment of a continued economic recovery, they summed up why they continue to do so with, “unemployment was expected to remain above, and inflation to remain somewhat below, levels consistent with the Committee’s objectives for some time.” With Fed policy still full speed ahead and conducting a policy that I believe is wholly inappropriate for the economic circumstances we are currently in, its apparent that the Fed has only one goal in mind in dealing with the enormous debt that still overhangs this economy, inflate out of it.

Category: MacroNotes

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4 Responses to “FOMC minutes bore, inflate away seems the goal”

  1. franklin411 says:

    Spoken like a true oligarch, Peter. =)

  2. boveri says:

    Inflate away is not only the goal, it is most likely the only way. What few have bothered to understand is the Fed tool chest is full to fight incipient or escalating inflation with the Fed funds rate at 0.25%. The slingshot effect would have dramatic effect with any amount of rate increase. If this is so, then inflating away could be a very desirable option.

  3. SivBum says:

    I can see that explosive esculation in prices of diamond and precious metals should be ignored in CPI because we don’t run out to buy another Au wedding band every week or even every few years. But it is scandalous to ignore necessities like food and petro.

    For sure, those federal officials who are independently wealthy and those wall street bigwicks with AGI of $250K or more, the price change in their $500 typical monthly food plus $400 gas bill (~$10K a year) amount to small change. Expect many of them to write off their meals as business expenses and deduct mileage in their Schedule C.

    As for an average family who works in Main Streets and Side Streets, that $10K equals $13K before taxes on their $50K AGI.

    (Median family income in 1999 (dollars) 50,046 : http://factfinder.census.gov/servlet/SAFFFacts )

  4. Marcus says:

    As food and energy prices rise, they become a larger percentage of American budgets. For the lower end of the population they can become a very large percentage which would drastically reduce the discretionary spending of those same individuals.

    So in effect if Americans spend more on food and energy, then they’ll have less to spend on everything else. Less demand for everything else means lower prices on everything else (supply/demand). So when food and energy soar, the core CPI (everything else) should naturally fall. Choosing to ignore what’s going up and only look at what’s going down therefore becomes even less rational.

    And can anyone explain to me how when housing prices were soaring, there was no significant inflation (I guess housing wasn’t included in CPI) but now the falling housing prices are the primary thing offsetting all the other rising prices (so apparently housing IS included in CPI)? Which is it, is housing in or out? Or have we just used substitution/hedonics to replace “homes” with “tents” or “cardboard boxes”?