FOMC minutes highlights

The latest minutes of the FOMC meeting from last month was released today and the following are some of the highlights:

Most meeting participants interpreted the evidence as indicating that credit markets still were not working well…

The rise in M2 slowed in February from the rapid pace recorded over the previous few months. Liquid deposits, while decelerating, continued to expand briskly.

The staff forecast for overall and core personal consumption expenditures (PCE) inflation over the next two years was revised down slightly.

The staff’s projections for real GDP in the second half of 2009 and in 2010 were revised down, with real GDP expected to flatten out gradually over the second half of this year and then to expand slowly next year as the stresses in financial markets ease, the effects of fiscal stimulus take hold, inventory adjustments are worked through, and the correction in housing activity comes to an end.

Participants did not interpret the uptick in housing starts in February as the beginning of a new trend, but some noted that there was only limited scope for hous-ing activity to fall further.

Overall, most participants viewed downside risks as predominating in the near term, mainly owing to potential adverse feedback effects as reduced employment and production weighed on consumer spending and investment, and as the weakening economy boosted the prospective losses of financial institutions, leading to a further tightening of credit conditions.

The household saving rate… would eventually level out and cease to hold back consumption growth.

Fiscal and monetary policies were likely to contribute significantly to aggregate demand in coming quarters.

Participants saw little chance of a pickup in inflation over the near term, as rising unemployment and falling capacity utilization were holding down wages and pric-es and inflation expectations appeared subdued.

Committee members agreed that substantial additional purchases of longer-term assets eligible for open market operations would be appropriate.

The whole minutes below:


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