FOMC Meeting Minutes Reflect Heightened Concern And Pending Action To Boost The Economy

Thursday, August 23, 2012 07:13
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FOMC Meeting Minutes Reflect Heightened Concern And Pending Action To Boost The Economy

Tags: economy | Federal Reserve | U.S. economy

The markets and investors have seemingly been hoping for further Fed action. The minutes of its July 31 – August 1 meeting of the Federal Open Market Committee (FOMC) indicate they just might get some. The FOMC spoke intently about coming to the rescue of the beleaguered economy. A third quantitative easing (QE3) was at the top of its list of options.

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There have been signs of economic life lately, primarily in hiring by businesses and the retail sector. Housing and manufacturing have also perked up a bit. These improvements introduced concern to the markets about whether the Fed would take any more action.
 
But the minutes show that the Fed is gaining consensus about taking action to boost the economy, noting that economic improvements—so far, at least—have not been convincing enough to offer confidence the upswing is firmly founded.
 
A move to boost growth is described as being highly controversial for the presidential election. But the Fed indicated that a move would be needed fairly soon unless the economy began to show more concrete signs of recovery.
 
The Congressional Budget Office (CBO) is adding to concerns, saying the country will be thrown back into recession unless Congress acts to avert the fiscal cliff scenario that will result if current tax laws are allowed to expire on schedule.
 
Democrats are urging action to boost employment. Republicans are urging the Fed to hold off for fears of sparking inflation and a weaker dollar.
 
The slow recovery makes the US economy more vulnerable to external forces such as Europe. In the last meeting, the Fed decided to gather more data before pulling the trigger to act. The main controversy within the Fed, however, seems to be swirling around exactly what action to take, not whether to act.
 
The Fed meets again September 12 and 13.

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