The FOMC Minutes: What They Said and What They Mean
Breaking it down to the heart of the matter.
The minutes from the September 17-18 Federal Reserve Open Market Committee (FOMC) meeting were released this afternoon, offering a glimpse behind the mind’s eye of our American central bankers.
This is how we heard it.
Sound bite: Most Fed officials saw QE tapering this year and ending mid-2014
Translation: We thought we were going to be a lot further along by now; this is going to take a lot longer than expected.
Sound bite: The FOMC saw "moderate" expansion; slower than anticipated.
Translation: We injected an obscene amount of liquidity into the system, but there is no velocity of money.
Sound bite: The Fed saw risk from "sizable increases in interest rates."
Translation: We have to figure out a way to generate growth without an attendant rise in interest rates.
Sound bite: The FOMC forecast a "gradual abatement" of headwinds slowing growth.
Translation: Time heals all wounds; besides, our faces are getting used to the weather.
Sound bite: The FOMC saw labor market improvement since September 2012.
Translation: There are signs of life if you know where to look!
Sound bite: The FOMC saw "significant risks" to economy including fiscal drag.
Translation: Did you hear what they said over on The Hill?
Sound bite: A number of FOMC participants saw rising fiscal policy risk.
Translation: And did you hear what he said in response?
Sound bite: FOMC participants forecast inflation increasing in the coming year.
Translation: Hey, remember that sound bite about the labor market improvement since September 2012? Let's leave out the part about wage growth not keeping pace with inflation.
Sound bite: Several FOMC participants saw financial conditions as tighter
Translation: Holy Moses -- more than 4 trillion bucks and conditions are getting tighter?!?
So, what does it all mean? Nothing... and everything. Lemme explain.
It means nothing because everyone is focused on the soap opera that is Washington, DC. As the world waits with bated breath for any sign that the debt ceiling will be pushed, which is the most likely path, that's all that matters, at least for now. In the meantime, the markets will wade through this process of price discovery.
It means everything because the Federal Reserve is knee-deep in financial engineering and if you listen closely, there is dissension -- if not confusion -- in the ranks. They’re psyched that the focus in on our dysfunctional government; it gives them every excuse to not taper until Janet Yellen settles into her seat.
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Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at email@example.com.
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