The FOMC said since the Nov meeting, “the economy has been expanding moderately, notwithstanding some apparent slowing in global growth.” They did acknowledge “some improvement in overall labor market conditions” but “the unemployment rate remains elevated.” After saying that business investment in equipment and software has continued to expand in Nov, today they said “business fixed investment appears to be increasing less rapidly.” They said household spending has continued to advance. The inflation commentary was virtually unchanged with their benign outlook in Nov. The commentary on OT and the reinvestment of maturing Agency and MBS paper into more of it was unchanged. Evans again dissented as he wanted QE3. Dudley, Yellen and Tarullo, who all spoke about QE3 in speeches, did not dissent. Bottom line, the economic commentary was mixed and they leave open the possibility of QE3 by again saying they are “prepared to employ its tools to promote a stronger economic recovery…” As long as Yellen and Dudley speak about more QE, we assume Bernanke believes the same and the more likely it happens at some point in 2012 if they remain unhappy with the pace of economic growth. Patience with the economic cycle is and has not been one of the characteristics of the Fed.
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