New minutes released Tuesday showed how the policy wonks at the Federal Reserve decided to do nothing new at their last meeting in March.
The Federal Open Market Committee kept the benchmark federal funds rate untouched between zero percent and 0.25 percent. That helps keep low interest rates on such consumer loans as auto loans, credit cards and mortgages. On the flip side, savers earn less on laughably low yields on savings deposits and certificates of deposits.
The policy-making body also didn't introduce any other stimulus efforts at its March meeting, including the catchy-named quantitative easing. That involves the central bank printing money and buying up securities to drive down interest rates.
The minutes revealed what the members weighed at the last meeting and how their views of the economy changed given more recent economic indicators.
Here are some takeaways.
The FOMC are pessimists: The members didn't expect to see an increase in jobs, a dip in unemployment and upbeat production numbers when it forecast gross domestic product in January. At March's meeting, given the rosy surprises, the members raised their collective GDP expectation, but tempered any enthusiasm by saying GDP growth "would pick up only gradually in 2012 and 2013."
Mother Nature made the jobs: The group was careful to throw any celebrations over the recent employment gains because the warmer-than-normal weather this winter created "uncertainty" around the issue. Not all economists are convinced by this theory.
"The warm weather can't explain all of it," says Paul Edelstein, director of financial economics at IHS Global Insight. "The job gains were too broad-based to be just on weather. It wasn't just construction."
Europe doesn’t matter anymore: For the better part of 2011, Europe was all anyone could talk about as a possible recession contagion. But that was last year. The FOMC members are just as ready as the rest of us to stop worrying about our neighbors across the pond. After Greece's bailout and other policy actions, the Europe scare had "somewhat diminished," the FOMC said. Of course, as long as those actions are implemented tout de suite.
Inflation is up. But it's too low: The FOMC conceded that inflation outpaced its expectations, which it adjusted. But have no fear, inflation is not getting out of hand. In fact, it's below the FOMC's target of 2 percent and may stay there for a while, which worried some members.
Low rates aren't a promise: When crafting the statement the FOMC released after its March meeting, the group wanted to make clear that its forecast to keep rates unchanged through late 2014 is not a guarantee.
"I think they stated that more emphatically this time to express to markets that if the economy is stronger than expect, they will raise rates sooner than expected," Edelstein says.
Jeffrey Lacker is a lonely man: Give the Richmond Fed President a medal for going out on his own. Lacker was the only one to vote against keeping rates unchanged through late 2014. He appears more worried than his peers about inflation as the economy recovers. And Lacker is not shy about dissenting. He has been critical of earlier, nontraditional policy decisions to alleviate the financial crisis.
Last, but not least, quantitative easing: The minutes showed that the FOMC is stepping further back from another round of monetary stimulus unless the economy turns for the worst.
"The overall take is that there seems to be slippage in support for more easing," Edelstein says.
Did you read the FOMC minutes? What nugget did you find?
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