FOMC Minutes Show Some Changing Views On Asset Purchases

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The Federal Reserve has released its minutes of the January 29 to 30 FOMC meeting. The general conditions were positive and the caution was mostly around the weather at the time. While we generally do not care about the minutes so much, this is a point in time where Fed-watchers and investors are hanging on every single bit of commentary that may lead to an idea of when the Federal Reserve will finally unravel its quantitative easing measures.

Here is the real survey result of the FOMC's comments about what others are expecting for a release of the no-rate and low-rate FOMC policy:

The expected path of the federal funds rate based on market quotes moved up on balance over the intermeeting period, likely reflecting a somewhat more positive assessment of the economic outlook. Results from the Desk's survey of primary dealers conducted prior to the January meeting showed that dealers continued to view the third quarter of 2015 as the most likely time of the first increase in the target federal funds rate. In addition, the median dealer continued to see the first quarter of 2014 as the most likely time for the Committee's asset purchases to conclude, although fewer dealers than in December expected those purchases to continue beyond 2014.

One thing that is different here are two amended efforts: authorization for foreign currency operations as well as domestic open market operations of government securities.

There was also a note that the FOMC does not normally have. It said that the FOMC is fully committed to "promoting maximum employment, stable prices, and moderate long-term interest rates" in these minutes.

Here are some basic comments:

  • Expansion in overall economic activity slowed in the fourth quarter of last year, reflecting weather-related disruptions and other transitory factors, but private domestic final demand grew at a solid rate.

  • Employment continued to increase at a moderate pace, and the unemployment rate, though still high, was lower at the end of the fourth quarter than in the preceding quarter. Private nonfarm employment expanded in December at about the same rate as in the fourth quarter as a whole, while government employment decreased. The unemployment rate was 7.8 percent in December, below its average in the third quarter, while the labor force participation rate was the same as its third-quarter average.

  • Consumer price inflation was subdued, and measures of longer-run inflation expectations remained stable.

  • Manufacturing production increased briskly in November and December after declining in October when activity was disrupted by Hurricane Sandy. As a result, factory output expanded only slightly in the fourth quarter as a whole, and the rate of manufacturing capacity utilization was only a little higher in December than in the third quarter.

  • Increases in real personal consumption expenditures picked up somewhat in the fourth quarter, boosted importantly by higher spending on motor vehicles.

  • Conditions in the housing sector continued to improve, but construction activity remained at a relatively low level, restrained by tight underwriting standards for mortgage loans and the substantial inventory of foreclosed and distressed properties.

  • Real business expenditures on equipment and software rose briskly in the fourth quarter after declining moderately in the preceding quarter. Although nominal new orders for nondefense capital goods excluding aircraft also increased markedly last quarter, the level of orders remained below shipments.

Investors should peruse the formal comments in full to see the difference in dissention that is taking place over views of how long and how much intervention should be continued.


The S&P 500 is down 6 points at 1,525 and the DJIA is down 22 points at 14,013, while the yield on the 10-year Treasury is down more than 1 basis point at 2.016% and the 30-year Treasury yield is down less than 1 basis point at 3.206%.

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