Fed Minutes: "Few Fed Members Said More Stimulus Would Be Needed"

Tyler Durden's picture

Just because Bernanke did not explain everything in the post-FOMC conference, here is more:

  • A FEW FOMC MEMBERS SAID MORE STIMULUS WOULD PROBABLY BE NEEDED
  • SEVERAL ON FOMC SAID FED SHOULD STUDY `NEW TOOLS' FOR EASING - C5 Galaxy??
  • FOMC PARTICIPANTS SAW MODERATE GROWTH LIKELY IN COMING QUARTERS
  • FOMC AGREED `IT WAS PREPARED' FOR FURTHER ACTION AS APPROPRIATE
  • FOMC SAW `UNUSUALLY HIGH' UNCERTAINTY FOR JOBLESS, GROWTH
  • SEVERAL OTHER FOMC MEMBERS SAW ACTION NEED IF ECONOMY WORSENS

Well, more stimulus was needed, and we got it in the form of Operation Twist 2. Nothing new, but algos need their flashing read headlines.

Here is what is spooking risk:

a few saw inflation risks as tilted to the upside; they generally were skeptical of models that rely on economic slack to forecast inflation and were concerned that maintaining the current highly accommodative stance of monetary policy over the medium run risked eroding the  stability of inflation expectations, with a couple noting that large long-run fiscal imbalances also posed a risk.

and this on Treasury market dysfunction:

Some members noted the risk that continued purchases of longer-term Treasury securities could, at some point, lead to deterioration in the functioning of the Treasury securities market that could undermine the intended effects of the policy.

and On China:

The main factors cited as underlying the elevated uncertainty about economic outcomes were the ongoing fiscal and financial situation in Europe, the outlook for fiscal policy in the United States, and a general slowdown in global economic growth, including the possibility of a significant slowdown in China.

Which caused this reaction in markets:

 

Full minutes wordcloud:

 

And here is the full thing:

 

FOMC Minutes June