FOMC Minutes, Mostly Spin Material

The minutes of the FOMC’ March 17 to March 18 meeting are out, and the long and short of the matter is that the FOMC’s decision to add massive liquidity was based upon a growing weakness and a low threat of inflation.  Some stabilizing was seen in economic numbers, but not at any levels close to positive.

Most meeting participants interpreted the evidence as indicating that credit markets still were not working well, and that the Federal Reserve’s lending programs, asset purchases, and currency swaps were providing much-needed support to economic activity by reducing dislocations in financial markets, lowering the cost of credit, and facilitating the flow of credit to businesses and households. Participants discussed the prospective further increase in the Federal Reserve’s balance sheet, with a focus on the Term Asset-Backed Securities Loan Facility (TALF) and open market purchases of longer-term assets.

The Federal Reserve’s programs to buy direct debt obligations of the federal housing agencies and agency-guaranteed MBS were on track to reach their initial targets of $100 billion and $500 billion, respectively, by the end of June. Participants agreed that the asset purchase programs were helping to reduce mortgage interest rates and improve market functioning, thereby providing support to economic activity.

…meeting participants viewed the expansion of the Federal Reserve’s balance sheet that might be associated with these and other programs as appropriate in order to foster the dual objectives of maximum employment and price stability.

And the no growth, no recover paragraph(s) excerpt:

• The information reviewed at the March 17-18 meeting indicated that economic activity had fallen sharply in recent months. The contraction was reflected in widespread declines in payroll employment and industrial production. Consumer spending appeared to remain at a low level after changing little, on balance, in recent months. The housing market weakened further, and nonresidential construction fell. Business spending on equipment and software continued to fall across a broad range of categories. Despite the cutbacks in production, inventory overhangs appeared to worsen in a number of areas. Both headline and core consumer prices edged up in January and February…. Labor market conditions continued to deteriorate. Private payroll employment dropped considerably over the three months ending in February. Employment losses remained widespread across industries, with the notable exception of health care. Meanwhile, the average workweek of production and nonsupervisory workers on private payrolls continued to be low in February, and the number of aggregate hours worked for this group was markedly below the fourth-quarter average…. Industrial production fell in January and February, with cutbacks again widespread, and capacity utilization in manufacturing declined to a very low level.

As far as the rest, you can see the full minutes at the FOMC site.

Sometimes we see moves from the Minutes, but everything in there should be mostly known by the time traders see this data.  Some levels are stabilizing, but they seem to be stabilizing at awful levels.

There is probably a lot of negative spin and even a hint of some positive spin that can be taken from these Minutes.  We’d rather operate under the gumption that the market should have figured out all of the post-decision and post-action interpretation by now.

Jon C. Ogg