Tuesday, August 29, 2006

Interesting Reaction to FOMC Minutes

The minutes from the last FOMC meeting were just released, and the market experience a volatile reaction. The initial move was lower, as the market tested today's lows, but then it quickly reversed higher and snapped back all the way to break-even for the day.

Here is a quick summary of the comments:
  • FOMC says growth, inflation pressures may ease gradually
  • Lacker was the lone dissenter
  • August rate decision was a close call
  • Below potential growth may last for six quarters
  • Past tightening may hold growth below potential
  • Limited risk in deferring necessary tightening
  • Considerable uncertainty about housing outlook
  • Upside risk to inflation remains significant

From these comments, it appears the Fed was still focused on inflation and implying that they are merely pausing while awaiting more data. I believe that inflation has peaked and that they will not raise rates again.


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