The Fed Minutes Add New Humility and Flexibility

Alan ReynoldsTheMay 3 –4 Minutes of the Federal Open Market Committee earned a welcome relief rally from stock and bond investors, which includes nearly everyone with an IRA or 401(k) retirement account. Why? In my judgement it was because FOMC participants sounded more pragmatic and humbler about predicting and managing the unknowable future. Specifically, the FOMC no longer seemed so rigidly committed to a fixed schedule of routine half ‐​point or larger increases in the federal funds rate from June through December. In place of the mid‐​March introduction of annual central planning, the Minutes now say such increases “would likely [but not certainly] be appropriate at the next couple of meetings.” Beyond that, it depen ds.“Many participants assessed that the Committee’s previous communications had been helpful… and had contributed to the tightening of financial conditions” (a euphemism for a terrifying two ‐​month slide in stocks and record crash inbond prices). But “several participants noted the potential for unanticipated effects on financial market conditions. Participants agreed that the economic outlook was highly uncertain and that policy decisions should be data dependent… [and that] risk‐​management conditions would be important in deliberation s over time regarding the appropriate policy stance.”Many FOMC members also assessed that font ‐​loading “tightening of financial conditions” through previous commu...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs