Road to Nowhere?

While it’s interesting to see how the Fed statement changes from one meeting to the next, it’s also instructive to see how it changes over time.  That said, let’s look at almost one year’s worth of commentary on the housing market and see how far we’ve come:

Sept. 23, 2009 (link is to all statements and minutes):

Conditions in financial markets have improved further, and activity in the housing sector has increased.

Nov. 4, 2009:

Activity in the housing sector has increased over recent months.

Dec. 16, 2009:

The housing sector has shown some signs of improvement over recent months.

Mar. 16, 2010

However, investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls.

April 28, 2010

Housing starts have edged up but remain at a depressed level.

June 23, 2010

Housing starts remain at a depressed level.

Aug. 10, 2010

Housing starts remain at a depressed level.

When something is “depressed” long enough, is it fair to say it’s a “depression”?

And my post would not be complete without a few words about Mr. Hoenig’s dissent (making five in a row).  Today’s Yesterday’s release says:

Voting against the policy was Thomas M. Hoenig, who judges that the economy is recovering modestly, as projected.

“As projected?”  As projected by whom?  Back in April, the Fed upgraded — yes, upgraded — its central tendency for 2010 GDP from its January forecasts.  January’s forecasts had been for 2010 to fall in a range of 2.8 to 3.5, and that was raised in April to a range of 3.2 to 3.7.  We’ve now got Q2 coming in at 2.4 (with a downward revision likely) and no one looking for anything better for the balance of the year.  So what, exactly, is he talking about?

Further, I’d point to Mr. Hoenig’s dissent at the April meeting, in which he “believed that the target for the federal funds rate should be increased toward 1 percent this summer, and that the Committee could then pause to further assess the economic outlook.”  Anyone still thinking that a 100 bp rise in the Fed Funds rate over the past four months would have been a good idea?  Oh, and did I mention that Mr. Hoenig also dissented in October 2007 — yes, October 2007 — because “he believed that policy should remain unchanged at this meeting. Projections for the U.S. and global economies suggested that growth was likely to proceed at a reasonable pace over the outlook period.”  How’d that work out for ya, Tom?

So when people like Paul Ryan cite “Mr. Hoening,” I don’t take him seriously.

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