Fed Meeting Comments

The FOMC minutes continued to state that inflation is the Committee’s “predominant concern.” However, they also emphasized that with “increased uncertainty about the outlook for both growth and inflation, the Committee also agreed that the statement should no longer cite only the possibility of further firming.” According to UBS, the "minutes continued to highlight that Fed officials expect that the economy is likely to expand at a 'moderate pace in coming quarters' but noted: 'additional evidence of sluggish business investment and recent developments in the subprime mortgage market suggested that the downside risks relative to the expectation of moderate growth had increased in the weeks since the January FOMC meeting. At the same time, the prevailing level of inflation remained uncomfortably high, and the latest information cast some doubt on whether core inflation was on the expected downward path. Most participants continued to expect that core inflation would slow gradually, but the recent readings on inflation and productivity growth, along with higher energy prices, had increased the odds that inflation would fail to moderate as expected.' In the end, the minutes reiterated that future policy adjustments will depend on the incoming data. We expect risk perceptions will continue to evolve in coming months as growth data continue to weaken, ultimately leading to Fed easing."