Canaccord Genuity Morning Coffee on FOMC Fed Minutes: Out of the Shadows.

May 17, 2012 11:27 AM EDT
Canaccord Genuity Morning Coffee on Fed Minutes: Out of the Shadows.

The Federal Open Market Committee (FOMC) on Wednesday released the minutes of the Committee meeting held on April 24-25, 2012. Several members indicated that additional monetary policy accommodation could be necessary if the economic recovery lost momentum or the downside risks to the forecast became great enough. We note, from the March 13 meeting minutes, only a "couple of members" indicated that the initiation of additional stimulus could become necessary if the economy lost momentum or if inflation seemed likely to remain below its mandate-consistent rate of 2% over the medium run. Participants' assessments of the economic outlook were little changed, however some thought it was premature to infer a stronger underlying trend from the recent positive indicators, since those readings may partially reflect the effects of the mild winter weather or other temporary influences. Labour market conditions had improved in recent months, and the unemployment rate had fallen, but almost all of the members saw the unemployment rate as still elevated relative to levels that they viewed as consistent with the Committee's mandate. Growth was expected to be moderate over coming quarters and then to pick up over time. Members expected the unemployment rate to decline gradually. Europe's economic woes cast a shadow over the FOMC meeting. Members cautioned that strains in global financial markets stemming from the sovereign debt and banking situation in Europe continued to pose significant downside risks to economic activity both in the U.S. and abroad. Some participants said they thought the policy actions taken in Europe would most likely ease stress in financial markets, but some expressed the view that a longer-term solution to the banking and fiscal problems in the euro area would require substantial further adjustment in the banking and public sectors. The FOMC also announced, a revised tentative meeting schedule for 2012 and a tentative meeting schedule for 2013.

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