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FOMC Minutes March 18th Meeting
Wed, Apr 9 2008, 07:22 GMT
by BBVA Bancomer Team
- • Fed more worried on downside risks to growth
- • Strains in financial markets continued to pose significant uncertainty to the economic outlook
- • We expect further monetary policy easing FOMC more pessimistic on economic activity FOMC minutes continued to reflect a more pessimistic view on economic activity and increased downside risks to growth. According to the Fed:
- • The contraction in homebuilding intensified
- • Consumer spending appeared to be weakening
- • Industrial production fell in February
- • Labor demand softened markedly in all sectors (except non businesses sector and state and local governments)
- • Unemployment edged down to 4.8 in February but labor force participation rate declined.
- • On the bright side, exports have risen sharply since December. Imports also increased but this was mainly due to oil imports. Most other categories of imports dropped in December and January on net, especially automotive and consumer goods.
In the forecast prepared for this meeting, the staff revised down its real GDP growth projection in 2008: expecting a contraction in 1S08 followed by a slow rise in 2S08. They expect GDP growth above potential in 2009.
On inflation, the Fed was disappointed by the increase of CPI. But most participants expected inflation to moderate later this year as growth in the US and abroad weakens, which would contribute to a flattening of oil and other commodities prices over time. As expected, the two dissenting votes to March action highlighted these inflationary pressures and advised to be patient until the full effect of previous policies take effect.
Board members noted that price discovery for mortgage-related financial assets had become increasingly difficult, raising the uncertainty around the balance sheet of financial institutions and intensifying the stress in financial markets. They agree that new liquidity facilities are being helpful.
FOMC will cut rates again in next meeting
Minutes reflect that FOMC members were significantly worried on GDP growth and the health of the financial sector. They were also increasingly worried about inflation, but less so at present. We expect FOMC to discuss a 25 or 50 bp cut on April 29th depending on incoming data.
Published on Wed, Apr 9 2008, 07:28 GMT
Archive
- Fed expects the economy to contract moderately in 2H08 and 1H09
Published On Thu, Nov 20 2008, 10:07 GMT - Fed appears more concerned on economic growth
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Published On Wed, Oct 8 2008, 08:00 GMT - FOMC Minutes of August 5th
Published On Thu, Aug 28 2008, 07:31 GMT
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