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Goldman's Take On The FOMC Minutes

Tyler Durden's picture




 

As usual, to get the best take on the Fed's minutes, it pays (metaphorically) to listen to those who actually set them...

From FRBNY Bill Dudley's successor, Jan Haztius:

MAIN POINTS:

1. Minutes from the April 26-27 FOMC meeting were broadly in line with expectations—Fed Chairman Bernanke’s post-meeting press conference having already revealed many details. Comments on the outlook largely mirrored forecast changes presented at the press conference, and showed greater uncertainty about both growth and inflation. The language used in the minutes suggests that upside inflation risks were a slightly greater concern to the committee at the time of the meeting. In particular, the minutes said that “Many participants had become more concerned about the upside risks to the inflation outlook.” In contrast, on activity the minutes said “Although most participants continued to see the risks to their outlooks for economic growth as being broadly balanced, a number now judged those risks to be tilted to the downside.” Since the meeting, commodity prices have declined and incoming activity data has remained relatively soft. Perceptions about the relative risks around growth and inflation may therefore have shifted.

2. With regard to the policy outlook, the committee was evenly balanced. The minutes said that “some participants expressed the view that in the context of increased inflation risks and roughly balanced risks to economic growth, the Committee would need to be prepared to begin taking steps toward less-accommodative policy”. However, others disagreed: “some participants indicated that … an early exit could unnecessarily damp the ongoing economic recovery”. In our view, the latter is likely closer to the sentiment of the committee leadership.

3. The committee also discussed exit strategy issues in detail at the meeting. A few points of uncertainty were clarified. First, the Fed will cease reinvestment of its securities portfolio as a first tightening step. Second, the committee will also stop reinvesting principal payments in its Treasury portfolio “soon after” stopping MBS reinvestment. Third, any sales of securities will come after rate hikes—as originally signaled by Chairman Bernanke in Congressional testimony last year.

 

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Wed, 05/18/2011 - 15:12 | 1288368 molecool
molecool's picture

"The language used in the minutes suggests that upside inflation risks were a slightly greater concern to the committee at the time of the meeting."

And why again are we all forced to subjectively interpret the hallow words of the mighty oracle?

How is that different from a bunch of Incas awaiting the [drug induced] judgements of their high priests a few centuries ago?

Wed, 05/18/2011 - 15:29 | 1288471 Dollar Bill Hiccup
Dollar Bill Hiccup's picture

It would be more enlightening if we had the drugs?

Wed, 05/18/2011 - 15:12 | 1288374 hangemhigh77
hangemhigh77's picture

Just call the FOMC Minutes, "A note from Lloyd"

Wed, 05/18/2011 - 16:00 | 1288599 TruthInSunshine
TruthInSunshine's picture

Something is causing this "rush." I wonder what it could be? Hmmmmm....

05-18 15:32: Companies rush to borrow - WSJ
Wed, 05/18/2011 - 15:11 | 1288383 Josh Randall
Josh Randall's picture

Wellll the "do as I say, not as I do" boys have an opinion, huh ? SQUID ALERT

Wed, 05/18/2011 - 15:15 | 1288388 slaughterer
slaughterer's picture

From FRBNY Bill Dudley's successor, Jan Haztius

 

Can they really employ Jan at the FRBNY?  Does he even have US citizenship?  Wouldn't he make more money staying exactly where he is?

Wed, 05/18/2011 - 15:32 | 1288497 Tyler Durden
Tyler Durden's picture

Dudley preceded Hatzius as Goldman head economist.

Wed, 05/18/2011 - 15:56 | 1288595 fuu
fuu's picture

Is there a citizenship requirement for the Federal Reserve? Has anyone checked Ben's BC?

Thu, 05/19/2011 - 04:00 | 1290544 StychoKiller
StychoKiller's picture

I'd be in favor of a general INTELLIGENCE test myself! :>D

Wed, 05/18/2011 - 15:16 | 1288391 NOTW777
NOTW777's picture

"showed greater uncertainty about both growth and inflation"

 

then stop lying if you are uncertain

Wed, 05/18/2011 - 15:17 | 1288424 NOTW777
NOTW777's picture

it was only weeks ago we were barraged with happy talk about the strengthening recovery, improvement, growth, etc

Wed, 05/18/2011 - 15:13 | 1288392 Pepe
Pepe's picture

Goldman: "Gimme" more money. I will tell ya what to do next.

Wed, 05/18/2011 - 15:17 | 1288404 NOTW777
NOTW777's picture

"However, others disagreed"  but we still characterize that disagreement as "evenly balanced"

Wed, 05/18/2011 - 15:15 | 1288411 Hugh G Rection
Hugh G Rection's picture

any sales of securities will come after rate hikes

 

So they're not going to sell any securities?

Wed, 05/18/2011 - 15:25 | 1288468 I am a Man I am...
I am a Man I am Forty's picture

this is the part that i am not getting, don't understand why they would say this

Wed, 05/18/2011 - 15:58 | 1288602 vas deferens
vas deferens's picture

When you are 75% of the mkt, on the buy side, you can't sell the market would implode.  You can only buy less as suggested in ending QE2.  The fed may raise rates 25 basis points (may as well be zero) and keep buying!!  Even with a quarter point increase in rates there still will be very few buyers other then the FED.

You are looking at this as if it is a free mkt.  The FED is fixing rates (this is just like price fixing only with interest rates) who knows what the the interest rates would be if the FED was not involved other then much higher.  ECON 101 teaches you price fixing does not work in the long run. 

ECON 101 lesson:

If you price fix at a price below the mkt price there will be a shortage.

If you put a price floor there will be a surplus. (this is what the fed is doing)...   Bonds prices are artificially to high creating a surplus (that the FED is buying up)

 

 

Wed, 05/18/2011 - 15:19 | 1288422 Bubbles the cat (not verified)
Bubbles the cat's picture

Yeah. Nicely proportioned, quietly comfortable, well balanced, soft and evenly textured. I just flushed a pile of it down the pan.....

Wed, 05/18/2011 - 15:32 | 1288440 Cognitive Dissonance
Cognitive Dissonance's picture

As usual, to get the best take on the Fed's minutes, it pays (metaphorically) to listen to those who actually set them...

So tell me again, who is the master and who is the dog?

Wed, 05/18/2011 - 15:23 | 1288441 darkaeye
darkaeye's picture

Every time I see Jan Haztius, I can't shake the image of Rick Moranis locking himself out of his apartment in GhostBusters.

Wed, 05/18/2011 - 15:39 | 1288480 MarketFox
MarketFox's picture

What´s that smell......

 

Smells like FASCISM.....

American Style.....

It´s that GS sort of smell.....

................

 

The firm serves as a pertinent proxy for the effectiveness of the SEC.....in that although they operate in a securities business frought with risks.....they can show profits for many days straight.....

 

Of course this is nothing unusual....

At least according to the SEC .....everything is fine.....and speaking of fines.....of course they are always a small fraction of the take......and there is never any jail time.....

 

And of course the poorer people of the planet can thank GS for their commodity based paper products....

 

You know.....those products that have caused hardships like feeding their children.....etc....

 

But of course....

 

It´s of no concern to JewYork City.....

Let the profit´s run....no matter to whom´s expense.....

 

 

 

 

Wed, 05/18/2011 - 15:30 | 1288490 buzzsaw99
Wed, 05/18/2011 - 15:33 | 1288499 Elmer Fudd
Elmer Fudd's picture

Why does the FED even bother putting together a balance sheet?  Seriously, what's the point?

Wed, 05/18/2011 - 19:45 | 1289450 Bartanist
Bartanist's picture

The most pertinent question of all.

When an entity has the supreme power to create and destroy money at will; with no consequences, no checks and balances and no oversight ... and use that money to favor or destroy anyone it wants on a globa basis, including an entire generation of American savers and retirees, WTF do they care about balance sheets.

The Fed's balance sheet is whatever they say it is and no one can challenge them or stop them from tinkering with the journal entries or the money they create for themselves.

Wed, 05/18/2011 - 15:42 | 1288526 fuu
fuu's picture

“Although most participants continued to see the risks to their outlooks for economic growth as being broadly balanced, a number now judged those risks to be tilted to the downside.”

 

Some of us see the sewage is just at chin level, some notice that not only is the sewage at chin level it is also rising.

Wed, 05/18/2011 - 15:43 | 1288527 Eireann go Brach
Eireann go Brach's picture

Tyler(s) you are one funny bastard LOL!

Wed, 05/18/2011 - 15:57 | 1288569 ebworthen
ebworthen's picture

 

Key sentence:

"However, others disagreed: 'some participants indicated that … an early exit could unnecessarily damp the ongoing economic recovery'. In our view, the latter is likely closer to the sentiment of the committee leadership."

Meaning = QE3

They MAY start by reducing purchase of securities and treasuries (and see what happens).

The end of MBS reinvestment MAY come after that

Then rate hikes MAY come after that.

The FED is having a nice game of MAYbe "JENGA" with itself and our money:  http://en.wikipedia.org/wiki/Jenga

 

Wed, 05/18/2011 - 15:56 | 1288578 Noah Vail
Noah Vail's picture

Cynics, I tell ya, cynics all.

 

Must be something in the air,

Or martinis without olives, or

More likely, filet of sole,

Without the fillet.

Wed, 05/18/2011 - 15:59 | 1288604 ebworthen
ebworthen's picture

I have a filet of beef for the FOMC.

I'd like to fillet their books.

I am tired of their red herring.

I'm not cynical, I'm marinated.

Wed, 05/18/2011 - 15:58 | 1288591 PulauHantu29
PulauHantu29's picture

...meaning....No ratus hikus com'n for a long, long time....

Praise the Lord!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Wed, 05/18/2011 - 15:58 | 1288605 Quinvarius
Quinvarius's picture

"If we weren't trapped in a box, we'd do this..."

Wed, 05/18/2011 - 19:48 | 1289449 Kokulakai
Kokulakai's picture

QExtended.

"The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period."

Wed, 05/18/2011 - 20:53 | 1289699 Ned Zeppelin
Ned Zeppelin's picture

Puh leze.

QE stops, Decent Interval follows, then QE 3.0. Repeat to infinity, or more likely, system collapse. The facade can endure as long as the foundation is sound.  It is not. 

 

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