Parsing Changes in the Fed Statement


Terrific comparo by the WSJ on the bias statement released by the Fed. Note the key phrase is “appears to have regained some traction” after “moderating earlier this year.”

Click for larger graphic
Graphic courtesy of WSJ

Here’s a brief excerpt:

“The Fed’s campaign to lift interest rates is intended not to slow the economy, but to lift rates from emergency lows so that the Fed doesn’t create an inflation problem in the future.

The target on the federal-funds rate, the rate banks charge each other for overnight loans, was chopped from 6.5% at the beginning of 2001 to a 45-year-low of 1% in mid-2003. With much advance warning, the Fed lifted the rate to 1.25% in June and 1.5% in August.

In the last few months, the economy now appears to have pulled out of a “soft patch” — as Federal Reserve Chairman Alan Greenspan has put it — that was largely the result of higher oil prices. After substantial hesitation, employers are hiring, adding about 1.7 million jobs since the low point in August 2003, though payrolls remain 1 million shy of the March 2001 peak. Following disappointing second-quarter growth of 2.8%, the U.S. economy is now growing at better than 3.5%, perhaps as strong as 4%, private economists estimate.

They forecast similar growth for the fourth quarter, though recent declines in long-term bond yields suggest the bond market isn’t as optimistic.”

Federal Reserve Statements: A Comparison

Federal Reserve Increases Key Rate Target to 1.75%
By David Wessel and Greg Ip
The Wall Street Journal, September 21, 2004 5:16 p.m.,,SB109559653883321547,00.html

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  1. Mike commented on Sep 23

    If you really want to parse Greenspeak, I’d recommend a thorough read of Larry Parks’ “What Does Mr Greenspan Really Think?”

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