Fed Minutes

The Minutes of the FOMC meeting of March 27-28, 2006  were just released. The money quotes show up towards the end (about 4th to last para):

For the "One and Done" crowd:

"Most members thought that the end of the tightening process was likely to be
near, and some expressed concerns about the dangers of tightening too much,
given the lags in the effects of policy." 

For the "More tightening to come" crowd:

"However, members also recognized that in current circumstances, checking upside risks to inflation was important to sustaining good economic performance. The need for further policy firming would be determined by the implications of incoming information for future activity and inflation."

The Fed Minutes note that:

-economic activity was expanding strongly in the first quarter;
-Consumer spending was on track to rise at a robust pace;
-business purchases of equipment and software picked up appreciably;
-Warm weather boosted housing construction in January and February;
-Private payrolls advanced solidly;
-Headline consumer price inflation jumped in January but moderated in
February as energy prices moved down.
-Core inflation remained
-sales of new homes dropped;
-house prices decelerated slightly
-Labor demand continued to increase;
-employment growth was especially brisk in the construction;
-the average workweek edged down in February;
-aggregate hours for production and nonsupervisory workers were above Q4 avg;
-unemployment rate continued to decline and averaged 4¾ percent;
-Consumer spending appeared to have rebounded strongly in Q1;
-consumption spending was robust, supported by advances in wage and salary income;
-Consumer confidence remained consistent with moderate increases in consumer spending;
-Housing activity moderated somewhat;
-Sales of new homes fell in the first two months of the year;
-Inventory of homes for sale was elevated compared with its range of the last several years.
-Mortgage applications continued to decline;
-rising mortgage rates damped demand;

Conclusion: The equity market has clearly focused on the phrase: "Most members thought that the end of the tightening process was likely to be

We remain as data dependent as ever . . .


Minutes of the Federal Open Market Committee
Federal Reserve, March 27-28, 2006

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