Minutes from the Jan FOMC meeting said the “economic recovery was firming, though the expansion had not yet been sufficient to bring about a significant improvement in labor market conditions.” They talked of a strong rise in consumer spending late ’10 and the continued expansion on spending on equipment and software. Residential and non residential construction remained weak, industrial production increased solidly and modest gains in employment continued.” On inflation, they say “Despite further increases in commodity prices, measures of underlying inflation remained subdued and longer run inflation expectations were stable.” Wage pressures were “still restrained.” They raised their ’11 GDP forecast and tightened their benign inflation expectation. Looking past ’11 for a Fed outlook, which they gave, is worthless info I believe as their forecasting ability should not be paid attention to.
With respect to their desire to further increase the Fed balance sheet, notwithstanding their acknowledgment of a continued economic recovery, they summed up why they continue to do so with, “unemployment was expected to remain above, and inflation to remain somewhat below, levels consistent with the Committee’s objectives for some time.” With Fed policy still full speed ahead and conducting a policy that I believe is wholly inappropriate for the economic circumstances we are currently in, its apparent that the Fed has only one goal in mind in dealing with the enormous debt that still overhangs this economy, inflate out of it.
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