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January 31, 2006
Adieu, Mr. Greenspan (and adieu, "measured")
The funds rate did go up another 25 basis points. The press release from the FOMC meeting contains only three differences from the last one. (New language in bold.)
Although recent economic data have been uneven, the expansion in economic activity appears solid. Core inflation has stayed relatively low in recent months and longer-term inflation expectations remain contained. Nevertheless, possible increases in resource utilization as well as elevated energy prices have the potential to add to inflation pressures.
The Committee judges that some further policy firming may be needed to keep the risks to the attainment of both sustainable economic growth and price stability roughly in balance. In any event, the Committee will respond to changes in economic prospects as needed to foster these objectives.
"Measured" is gone from the first sentence of paragraph two. Not much to say about it--we knew it would happen sooner or later (click here and here).
The language about the uneven data is no doubt a reference to Friday's GDP report. And finally, the word "may" in the first sentence of paragaph two replaces the words "likely to be". I interpret "may" is being somewhat weaker.
The door is open for leaving rates unchanged in March or May, however, on the March meeting, I would still lean to an increase as being more likely than not. The May meeting is really a coin toss at this point.
UPDATE: In other news, Ben Bernanke was confirmed by the Senate. This Reuters story does not give the vote details as to how many voted against confirmation.
WASHINGTON (Reuters) - The U.S. Senate on Tuesday confirmed White House adviser Ben Bernanke as chairman of the Federal Reserve, clearing him on Alan Greenspan's last day in office to take over America's most powerful economic post.
The Senate approved the former Fed governor on a voice vote.
He enjoyed strong support from both Republicans and Democrats, however Sen. Jim Bunning, a Kentucky Republican, spoke in opposition to the nomination, complaining that Bernanke would too closely follow Greenspan's policies.
Posted by William Polley at January 31, 2006 01:55 PM
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