December 2011	January 2012	Comments
Information received since the Federal Open Market Committee met in November suggests that the economy has been expanding moderately, notwithstanding some apparent slowing in global growth.	Information received since the Federal Open Market Committee met in December suggests that the economy has been expanding moderately, notwithstanding some slowing in global growth.	No change.
While indicators point to some improvement in overall labor market conditions, the unemployment rate remains elevated.	While indicators point to some further improvement in overall labor market conditions, the unemployment rate remains elevated.	The unemployment rate is down, but few jobs are being created, and people are dropping out of the labor force.? This is improvement?
Household spending has continued to advance, but business fixed investment appears to be increasing less rapidly and the housing sector remains depressed.	Household spending has continued to advance, but growth in business fixed investment has slowed, and the housing sector remains depressed.	Shades down their view on business investment.
Inflation has moderated since earlier in the year, and longer-term inflation expectations have remained stable.	Inflation has been subdued in recent months, and longer-term inflation expectations have remained stable.	True for the last few months for goods & services prices, but past isn?t prologue.? TIPS are showing higher inflation expectations.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability.	Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability.	No change.? Mentions of the statutory mandate are always meant to hide the distasteful aspects of what they do.
The Committee continues to expect a moderate pace of economic growth over coming quarters and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate.	The Committee expects economic growth over coming quarters to be modest and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate.	No change.
Strains in global financial markets continue to pose significant downside risks to the economic outlook.	Strains in global financial markets continue to pose significant downside risks to the economic outlook.	No change.
The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee?s dual mandate. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.	The Committee also anticipates that over coming quarters, inflation will run at levels at or below those consistent with the Committee’s dual mandate.	Drops language inflation and inflation expectations.
To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate,	To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy.	Adds that the FOMC will be highly accommodative, if it hasn?t been so already.
The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.	In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.	Extends the period of high accommodation for another 15-18 months. They moved this paragraph up from last time.
the Committee decided today to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.	The Committee also decided to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.	No real change.? Central bank asset policy does not have that big of an impact on economic activity. They moved this paragraph down from last time.
The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools to promote a stronger economic recovery in a context of price stability.		Deletes meaningless sentence.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Richard W. Fisher; Narayana Kocherlakota; Charles I. Plosser; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen.	Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Sarah Bloom Raskin; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen.	Three new regional Fed presidents.? Storm and fury, signifying nothing.
Voting against the action was Charles L. Evans, who supported additional policy accommodation at this time.	Voting against the action was Jeffrey M. Lacker, who preferred to omit the description of the time period over which economic conditions are likely to warrant exceptionally low levels of the federal funds rate.	Make that four, with a dissent from Mr. Lacker, who is likely the only one to dissent in 2012.? Talked with him at the Cato Monetary Conference ? he is skeptical of the asset policy at the Fed.? This dissent disagrees with the Fed trying to give a time period for how long the Fed funds rate will remain low.

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Comments

• So they extend the period of accommodation by a little more than a year.? Sends financial markets flying, and especially TIPS prices, but will have little impact on the economy.? (Do they want the yield on 30 year TIPS to go negative?? Looks that way.)
• GDP growth is not improving much if at all, and the unemployment rate improvement comes more from discouraged workers.? Inflation has moderated, but whether it will stay that way is another question.
• In my opinion, I don?t think holding down longer-term rates on the highest-quality debt will have any impact on lower quality debts, which is where most of the economy finances itself.
• Also, the reinvestment in Agency MBS should have limited impact because so many owners are inverted, or ineligible for financing backed by the GSEs, and implicitly the government, even with the recently announced refinancing changes.
• The key variables on Fed Policy are capacity utilization, unemployment, inflation trends, and inflation expectations.? As a result, the FOMC ain?t moving rates up, absent increases in employment, or a US Dollar crisis.? Labor employment is the key metric.
• The Fed is out of good policy tools, so it will use bad policy tools instead, and for longer than before.

Questions for Dr. Bernanke:

• Why do think extending the period of accommodation by a little more than a year will have any significant effect on the economy, aside from stock and bond prices?
• Is it possible that you don?t really know what would have worked to solve the Great Depression, and you are just committing an entirely new error that will result in a larger problem for us later?
• Discouraged workers are a large factor in the falling unemployment rate. Why do you think the economy is doing so well at present?
• Why do you think that holding down longer-term rates on the highest-quality debt will have any impact on lower quality debts, which is where most of the economy finances itself?
• Why will reinvestment in Agency MBS help the economy significantly?? Doesn?t that only help solvent borrowers on the low end of housing, who don?t really need the help?
• Couldn?t increased unemployment be structural, after all, there is a lot more competition from labor in emerging markets?
• Isn?t stagflation a possibility here?? I mean, no one expected it in the ?70s either.
• Could we end up with another debt bubble from keeping short rates so low?
• If the Fed ever does shrink its balance sheet, what effect will it have on the banks?