Yesterday afternoon in a
very abbreviated report – reading time 1 minute – the U.S. Federal Reserve
Policy Committee did little but affirm its plans to keep U.S. interest rates
low, and to continue buying $75 billion in Treasury bonds each month through
June to support the U.S. economy.
Fed officials said:
·
the U.S.
economic recovery is on firmer footing, and the labor market is gradually improving;
·
household
spending and business equipment investment continue to expand;
·
“investment in
non-residential structures is still weak”;
·
“the housing
sector continues to be depressed”;
·
they expected
the recent rise in oil and other commodity prices in recent months and weeks to
be temporary (reported as ‘transitory’), and said close attention will be paid
to inflation and inflation expectations, which currently is “somewhat low” in
circumstances of an “elevated” unemployment rate; and,
·
“the Committee
continues to anticipate a gradual return to higher levels of resource
utilization in a context of price stability”.
You can agree or disagree
with the first five bullet points – although points three and four seem clearly
correct. I have read the sixth bullet
point multiple times, and think it is ‘economist-speak’ for “we expect price
stability for resources going forward, and expect the U.S. economy to grow into
using more resources than it now does”.
Please add a comment to this commentary if you disagree with my
interpretation.
Interestingly, the Fed
report is completely silent on the:
·
goings-on in
North Africa and the Middle East.
One can only assume the Fed believes the events of the past few weeks in
those geographies are simply going to be mute, or otherwise simply don’t
matter, in the context of the U.S. economy as it goes forward. I for one don’t think we likely have
seen the end of those events, nor do I think they can be summarily dismissed in
a macro-economic context – let alone a U.S. one; and,
events unfolding from Friday and continuing in Japan. I find it inconceivable that the Fed
report did not make some reference to Japan in its report yesterday – if only
to say that ‘the events are ongoing, it is too early to comment on their possible
consequences, but that those consequences might very well affect not only the
economy of Japan but the economies of other countries including the U.S.’ Could this failure to mention what may
prove to be a ‘world important economic’ event be a result of a focus by Mr.
Bernanke on ‘equity market stability’?