The minutes of the Federal Open Market Committee (FOMC) meeting on March 13 show that the Federal Reserve upgraded its forecast, perhaps slightly more than many feel was implied by the Fed’s statement released that day. The majority of the FOMC and meeting participants (who include regional Fed Presidents who rotate voting privileges on the FOMC) are still concerned about the subpar performance of the economy, particularly the performance of labor markets. This is despite the recent uptick in employment. They fear, in particular, that the economy has not improved enough to become self-feeding. They also remain concerned about the ongoing fragility in Europe, as indicated by recent uncertainty regarding Spain and Portugal.
That said, there remains a vocal minority of participants on the committee who feel that the economy is on stronger footing, and may even be showing some traction in terms of wages. Texas is clearly doing better than other parts of the country; this is one place where regional differences show up.
Bottom Line: The Fed gave the markets little new information to chew on, especially in terms of additional easing. More recent comments by Chairman Bernanke were more dovish. At the end of the day, the Fed wants to keep dry what little powder it has left, especially if U.S. policymakers fail to deal with the fiscal cliff we could fall off with the expiration of tax cuts and mandatory spending cuts slated for the start of 2013. This is to say nothing of another potential debt downgrade, something France is also grappling with, which I witnessed firsthand this past weekend.