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Highlights of the Minutes of the Fed FOMC March 2010 Meeting

By
Mortgage and Lending with Mortgage Alliance Group - San Diego, CA - NMLS#305667

At 2pm ET, minutes of the last FOMC policy meeting were made available.

These are brought courtesy of Mortgage Market Guide: 

Here are the highlights from FOMC minutes:

  • FOMC MEMBERS BELIEVED EXTENDED PERIOD LANGUAGE WOULD NOT PRECLUDE PROMPT POLICY TIGHTENING IF NEEDED
  • A FEW FED MEMBERS AT MARCH 16 MEETING SAW OF RISK OF EARLY RATE HIKE EXCEEDING DANGER OF WAITING TOO LONG
  • BANK LENDING IS STILL CONTRACTING
  • HOENIG WAS ONLY MEMBER OF COMMITTEE TO EXPRESS CONCERN OVER "EXTENDED PERIOD" LANGUAGE
  • MEETING PARTICIPANTS FELT UNDERLYING INFLATION LIKELY TO STAY SUBDUED
  • POLICYMAKERS CITED SIGNS THAT INFLATION EXPECTATIONS "REASONABLY" WELL-ANCHORED
  • MEMBERS WORRIED ABOUT ELEVATED UNEMPLOYMENT, FEARED RECOVERY COULDN'T BE SUSTAINED WITHOUT PICKUP IN JOBS
  • HOUSEHOLD SPENDING TO BE CONSTRAINED BY WEAK LABOR MARKETS, TIGHT CREDIT, SLOW INCOME GROWTH-FED MINUTES
  • CONCERNED PACE OF HOUSING ACTIVITY LEVELING OFF, FORECLOSURES TO REMAIN "QUITE HIGH"
  • IF ECONOMIC OUTLOOK WORSENED OR TREND INFLATION DECLINED FURTHER, "EXTENDED PERIOD" OF LOW RATES COULD LAST "QUITE SOME TIME"

Re: the use of the phrase "Extended Period" in the FOMC Statement:

A number of members noted that the Committee's expectation for policy was explicitly contingent on the evolution of the economy rather than on the passage of any fixed amount of calendar time. Consequently, such forward guidance would not limit the Committee's ability to commence  monetary policy tightening promptly if evidence suggested that economic activity was accelerating markedly or underlying inflation was rising notably; conversely, the duration of the extended period prior to policy firming might last for quite some time and could even increase if the economic outlook worsened appreciably or if trend inflation appeared to be declining further.

This means that the removal of the phrase "EXTENDED PERIOD" from the FOMC Statement does not imply the Fed will be hiking the Fed Funds Rate in the following six months. A rate hike is solely dependent upon economic developments.

The Staff's Outlook:

"In the forecast prepared for the March FOMC meeting, the staff's outlook for real economic activity was broadly similar to that at the time of the January meeting. In particular, the staff continued to anticipate a moderate pace of economic recovery over the next two years, reflecting the accommodative stance of monetary policy and a further diminution of the factors that had weighed on spending and production since the onset of the financial crisis. The staff did make modest downward adjustments to its projections for real GDP growth in response to unfavorable news on housing activity, unexpectedly weak spending by state and local governments, and a substantial reduction in the estimated level of household income in the second half of 2009."

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Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland
  • CONCERNED PACE OF HOUSING ACTIVITY LEVELING OFF, FORECLOSURES TO REMAIN "QUITE HIGH"
  • IF ECONOMIC OUTLOOK WORSENED OR TREND INFLATION DECLINED FURTHER, "EXTENDED PERIOD" OF LOW RATES COULD LAST "QUITE SOME TIME
  • For one with a Libor, this could be considered good news. 

    Somehow, I'm not comforted.

    Apr 06, 2010 10:57 AM
    Joe Hansen
    Joe Mortgage - Precision Mortgage Inc. - Phoenix, AZ
    Joe Mortgage Team

    I'm with you Lenn.  Things are still bleak, but I am hoping for a better tomorrow.  Thanks for the update Steve.

    Apr 06, 2010 11:15 AM
    Bryan Watkins
    LRA Real Estate Group - Mesa, AZ

    Steve, good post. we need to stay in business to build our businesses.

    Apr 06, 2010 11:52 AM