FOMC Minutes Indicate No Shift In Fed's Views, Even As Many Members See More Easing Likely Warranted

Tyler Durden's picture

The thoughts of the FOMC from a mere three weeks ago - before a 30bps rise in 10Y yields (40bps in 30Y), 5% rise in the NASDAQ, 8.5% rise in AAPL, and 85bps compression in Spanish bond spreads - are out. It appears little has changed in their muddle-through, always at-the-ready, wish-it-were-better view of the world. Via Bloomberg,


Translation: "Many on FOMC want the S&P at all time highs without actually doing any QE, ever, because that will mean the Fed is officially out of bullets"

Pre: 10Y 1.738, ES 1406.5, Gold 1637, Oil 96.6, EUR 1.2472
Post: 10Y 1.735 unch, ES 1411.5 +5, Gold 1647 +10, Oil 97.05 +.45, EUR 1.2515 +43

On inflation expectations:

Most members continued to anticipate that, with longer-term inflation expectations stable and the existing slack in resource utilization being taken up very gradually, inflation would run over the medium term at a rate at or below the Committee’s objective of 2 percent. In contrast, one member thought that the economy may be operating near its current potential and, thus, that maintaining the Committee’s current highly accommodative policy stance well into 2014 would pose upside risks to the inflation outlook.

Thank you Lacker.

The key section from the minutes that is briefly pushing stocks higher:

Many members expected that at the end of 2014, the unemployment rate would still be well above their es-timates of its longer-term normal rate and that inflation would be at or below the Committee’s longer-run objective of 2 percent. A number of them indicated that additional accommodation could help foster a more rapid improvement in labor market conditions in an environment in which price pressures were likely to be subdued. Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a sub-stantial and sustainable strengthening in the pace of the economic recovery. Several members noted the bene-fits of accumulating further information that could help clarify the contours of the outlook for economic activity and inflation as well as the need for further policy action. One member judged that additional accommodation would likely not be effective in improving the economic outlook and viewed the potential costs associated with such action as unacceptably high. At the conclusion of the discussion, members agreed that they would closely monitor economic and financial devel-opments and carefully weigh the potential benefits and costs of various tools in assessing

On what form the future QE may be - first LSAP

One of the policy options discussed was an extension of the period over which the Committee expected to maintain its target range for the federal funds rate at 0 to ¼ percent. It was noted that such an extension might be particularly effective if done in conjunction with a statement indicating that a highly accommodative stance of monetary policy was likely to be maintained even as the recovery progressed. Participants also exchanged views on the likely benefits and costs of a new large-scale asset purchase program. Many participants expected that such a program could provide additional support for the economic recovery both by putting downward pressure on longer-term interest rates and by contributing to easier financial conditions more broadly. In addition, some partici-pants noted that a new program might boost business and consumer confidence and reinforce the Committee’s commitment to making sustained progress toward its mandated objectives. Participants also discussed the merits of purchases of Treasury securities relative to agency MBS. However, others questioned the possible efficacy of such a program under present circumstances, and a couple suggested that the effects on economic activity might be transitory....Several worried that additional purchases might alter the process of normalizing the Federal Re-serve’s balance sheet when the time came to begin re-moving accommodation. A few participants were con-cerned that an extended period of accommodation or an additional large-scale asset purchase program could increase the risks to financial stability or lead to a rise in longer-term inflation expectations.

Then IOER rate cut:

Some participants commented on other possible tools for adding policy accommodation, including a reduc-tion in the interest rate paid on required and excess reserve balances. While a couple of participants favored such a reduction, several others raised concerns about possible adverse effects on money markets. It was noted that the ECB’s recent cut in its deposit rate to zero provided an opportunity to learn more about the possible consequences for market functioning of such a move. In light of the Bank of England’s Fund-ing for Lending Scheme, a couple of participants ex-pressed interest in exploring possible programs aimed at encouraging bank lending to households and firms, although the importance of institutional differences between the two countries was noted.

On the phrasing of the statement:

With respect to the statement to be released following the meeting, members agreed that it should acknowledge the deceleration in economic activity, the small gains in employment, and the slowing in inflation reflected in the economic data over the intermeeting period. Because most saw no significant changes in the medium-run outlook, they agreed to continue to indi-cate that the Committee anticipates a very gradual pickup in economic activity over time and a slow de-cline in unemployment, with inflation at or below the rate that it judges most consistent with its dual man-date. Many members expressed support for extending the Committee’s forward guidance, but they agreed to defer a decision on this matter until the September meeting in order to consider such an adjustment in the context of updates to participants’ individual economic projections and the Committee’s further consideration of its policy options....Consistent with the concerns expressed by many members about the slow pace of the economic recovery, the downside risks to economic growth, and the consider-able slack in resource utilization, the Committee decid-ed that the statement should conclude by indicating that it will provide additional accommodation as need-ed to promote a stronger economic recovery and sus-tained improvement in labor market conditions in a context of price stability.

Full minutes:


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Precious's picture

Time for war and the mother of all pussy riots.  Unilateral or joint attack by Israel and US against Iran, leading to cyber counterstrikes by Russian and Chinese hackers that bring US financial markets to a standstill.  Plan for that Ben.

ParkAveFlasher's picture

"mother of all pussy riots" ... nice

TruthInSunshine's picture



The Bernank (speaking for the collective borg): 

"We're going to do QE3 or maybe not! We mean it this time! Doubt that pledge to your own detriment!"


{Bernank pulls out a cap gun as a demonstrative aid and pops off a few caps into the air}



C'mon, Bernank. QE3 bitch!  Let's see that big $5.00 for a gallon of 87 octane!

Stoploss's picture

Don't forget the additional drop in house prices too!

The question i have for the FED would be that, since they are using velocity of money to keep " inflation tame " ( it is lower than the level in 1933 ), while food and energy continue to rise, what exactly do they expect to happen when the velocity of money reaches zero??

The FED is the sole reason there is no velocity of money, due to the obvious unescapeable fact they have ordered banks NOT TO LEND, to specifically keep their inflation target artificially low, to allow them to use this endless bullshit game of we're ready if need be.

Further velocity supression will be required in less than thirty day's.

Spastica Rex's picture

I mentioned this the other day -

I'm poor and rent where I live is way higher than a mortgage, so I got one from a local credit union.

I asked the loan officer if the mortgage would ever be sold to another party, he said, "Oh, no, never!"

30 days later I got a letter in the mail saying that Fannie Mae now owns my loan.

Local credit union has cash, American tax payer holdes note for my crumbling 1957 rambler.

LMAOLORI's picture




"Stoploss The FED is the sole reason there is no velocity of money, due to the obvious unescapeable fact they have ordered banks NOT TO LEND, to specifically keep their inflation target artificially low, to allow them to use this endless bullshit game of we're ready if need be.

Further velocity supression will be required in less than thirty day's."


Exactly just in time to save obama it's a two fer if they had done it in August with Republicans complaining they wouldn't have an excuse other then politics for when they do it in September. 

Congressional Republican's to Bernanke: Do less, not more


Judging from recent economic commentary, there are plenty of economists who think the Federal Reserve needs to do much, much more to juice the U.S. economy. Scott SumnerPaul Krugman, and the Economist have all lambasted Fed Chairman Ben Bernanke on this front.

But in Congress, this view seems curiously absent. On Thursday morning, Bernanke testifiedbefore the U.S. Congress Joint Economic Committee. Republicans at the hearing were quick to criticize the Fed chairman over recent reports that the central bank might contemplate more “quantitative easing” — the so-called QE3 — to jump-start the stalling recovery. Very few Democrats, however, offered any sort of counterbalance. At the moment, most of the political pressure on Bernanke is to do lessstimulus, not to do more.

“I wish you would take QE3 off the table,” said Texas Rep. Kevin Brady, the ranking Republican on the committee. “I wish you would look the markets in the eye and say that the Fed has done too much.” Similarly, Sen. Jim DeMint (R-SC) complained to Bernanke that many of the stimulative measures the Federal Reserve has taken “are giving us a false sense of security.”

But what about Democrats? The ranking Democrat on the committee, Sen. Bob Casey, merely inquired, in a neutral tone, whether the Federal Reserve was planning to take further action. Bernanke simply replied that the Fed was still contemplating the matter, and a lot depended on whether “there will be enough growth going forward to make material progress on the unemployment rate.” (Fed officials meet on June 19 to discuss their next steps.)

Indeed, the harshest grilling that Bernanke got on the Democratic side was from Sen. Bernie Sanders (I-Vermont), who was more interested in criticizing the Federal Reserve for various conflicts of interest — the fact that, for instance, Jamie Dimon, the CEO of JPMorgan, still sits on the board of the New York Fed. About the only liberal encouragement Bernanke received was from Rep. Carolyn Maloney (D-N.Y.), who said, “I believe that the Fed should use any tool in its arsenal to provide support to our fragile economy.”

As far as the money market argument....

"Some participants commented on other possible tools for adding policy accommodation, including a reduc-tion in the interest rate paid on required and excess reserve balances. While a couple of participants favored such a reduction, several others raised concerns about possible adverse effects on money markets."

Alan Blinder crushes that argument

"The Fed has steadfastly opposed this idea for years. Why? One objection is true but silly: Lowering the IOER might not be a very powerful instrument. No kidding. Are there a lot of powerful instruments sitting around unused? 

The other objection is that making the IOER zero or negative would push other money-market rates even closer to zero than they are now, thereby hurting money-market funds and otherwise impeding the functioning of money markets. My answer two years ago was that we have more important things to worry about. My answer today is that it has mostly happened anyway: U.S. money-market rates are negligible

It is noteworthy that the European Central Bank just jumped ahead of the Fed by cutting the rate it pays on bank deposits to zero—and European money markets did not die. Denmark's National Bank went even further, dropping its deposit rate to minus 20 basis points. Yet the Little Mermaid still sits in Copenhagen harbor.

The Fed's hostility toward lowering the interest on excess reserves is almost self-contradictory. When Mr. Bernanke lists the weapons the Fed plans to use when the time comes to tighten monetary policy, he always gives raising the IOER a prominent role. His reasoning is straightforward and sound: If the Fed makes holding reserves more attractive, banks will hold more of them. Why doesn't the same reasoning apply in the other direction?"

Muppet of the Universe's picture

I must say I disagree.  If the Fed truly is not Qe'ing the market, then they have successfully used QE.  Think about it, if they haven't been expanding the money supply for QE, but their leading promises of QE are forcing the market higher, then the plan actually worked marvelously. Above and beyond this, this also means they can keep bond yields remarkably low, and we can see these days where bonds explode higher and the market also moves higher, thereby negating the correlation between the two.  At the same time, the increasing market forces the dollar down and establishes Euro strength.


Now while none of this fixes Europe in a long term sense, it still establishes the U.S. in a position of strength.  The real question that remains, what eventual impact will exploding PM values have on the value of fiat currencies like the U.S. dollar. 


More importantly, what happens to the value of the dollar, if the U.S. isn't able to uphold the Petro-Dollar Accord?  Will it require the U.S. to go to war with China and Russia in order to enforce Opec's compliance?  This to me, is the greatest threat to the dollar.  Forget everything else, the dollar hinges on the success to intimidate the Opec nations to obey the Petro-dollar accord.

BLOTTO's picture

Dear Tyler and fellow ZH'rs...


What are the chances right before...'they'...hit the Q...E...3 button...

'Someone' -

BAM! - hits the false flag button?

Who needs QE3 when a massive war is happenning in the ME/NA region and abroad?

A possibility?


These pyschopaths are highly intelligent and have tricks up their sleeve(s) that we havent even covered yet - as smart as we ZH'rs are...they are smarter...and have more money...and more resources...and more connections, etc...


Stay tuned...and 'in tune'

MachoMan's picture

I'm not sure it's fair to say they're smarter, as that implies capacity...  however, there is certainly an information gap that is punitively exploited, which has the same effect.

Wm the Shrubber's picture

Their biggest advantage is a complete lack of conscience and single-minded focus on maintaining power, wealth and position for the status quo.

MachoMan's picture

Of course, it's their greatest weakness as well...

poor fella's picture

If this occured, spending would hit the shitter (real more badder than it already has) as people watch the embedded 'reporters' covering the US's new empire building project. Say hello to my little Great Depression III.

That's why Bush Jr. Inc. pleaded with people to continue to be as shallow as normal and get out there and 'buy buy buy'.


Silver Bug's picture

If the market goes down enough, then the easing will come. QE to infinity is assured.

Racer's picture

Same old, same old, waffle, lie, waffle, lie, scratch head, waffle, lie, lie, lie...

TruthInSunshine's picture


Scizophrenic, broken, Bernank'd markets.



transaccountin's picture

but but but steve lies-man i suck a fatty says we are this close to qe3.

Quinvarius's picture

We'd need a time machine to get back to QE3.

QE1, QE2, QE lite (QE3), Twist (QE4), Twist 2 (QE5).

And until Steve Liesman personally sucks my fatty, I will never believe anything but pie goes into that hole.

Cognitive Dissonance's picture

To a fiat crack addict >this close< is good enough for a Placebo Effect high.


Was that as good for you as it was for me?

PiratePawpaw's picture

It depends on what your definition of "this" is.

Jason T's picture

manufacturing has been falling since the end ofWW2

easing soon means keep them rates down at any cost.. 

soon as them rates go up, game over.

pazmaker's picture

and the EUR/USD clears 1,25!

ParkAveFlasher's picture


Robot Traders Mom's picture

What's the difference between ignorance and indifference?


I don't know and I don't care.


-FOMC Joke Around 2012

FL_Conservative's picture

The bullshit continues as the EUR/USD takes some viagra.  There will be NO QE3 until BOTH the economy and the equity market are in the tank!

alien-IQ's picture

They don't have to ever do QE...they could just claim to be willing to and that seems to move the markets plenty.

this has gone far past being pathetic.

Spastica Rex's picture

Why not just create trading algorithms that never really sell?

Oh, wait...

alien-IQ's picture

I guess that explains the massive volume buying /ES.

HaroldWang's picture

No reason for QE3 with markets up near highs. Just talking about it runs it up so no reason to ever implement it.

HelluvaEngineer's picture

Marketwatch apparently reporting discussions regarding QE3, of course in the context that it's a lock-up.

PatBateman's picture

bubbles bubbles, everywhere

BeetleBailey's picture

Some douche on CNBC just took credit for the word "hopium"....

HaroldWang's picture

Doesn't matter. You're probably one of the ten people watching CNBC today that actually saw that.

Meesohaawnee's picture

you mean to tell me someone actually listens to CNBS??

Yen Cross's picture

      The guys name is Brian Sullivan, and he's a fucking sock puppet!

kaa1016's picture

There goes the Leisman spin on CNBS about QE3 coming in September. These people have a god complex thinking that they have the ability to wave a QE wand improve the economy and we all live happily ever after. It's only a matter of time before this house of cards comes tubbling down.

Hype Alert's picture

When rates go up, they have to print.  Now, what's the interest payment on that debt at higher rates?

It's a problem. 


We need to start looking at stock charts from Zimbabwe again.  I wonder if the algo's are programmed for those patterns?

HappyCamper's picture

The interest rate is whatever the Fed wants it to be.  They ARE the market.  ZIRP is just another way to monetize the debt.

And yes, the comparison to Zimbabwe is accurate.


El's picture

Well, well, well...what have we here.

“Those wondering why the Department of Justice has refused to go after Jon Corzine for the vaporization of $1.6 billion in MF Global client funds need look no further than the documents uncovered by the Government Accountability Institute that reveal that the now-defunct MF Global was a client of Attorney General Eric Holder and Assistant Attorney General Lanny Breuer’s former law firm, Covington & Burling.”

Pareto's picture

Corzine and Holder should have done to them what Howard Stern did to Horse last night on AGT.  fuckers.

Peter K's picture

SNB needed some help getting their 1.2500a filled:)

slaughterer's picture

Short the pops.  

Doubt will creep in fast here.  

fonzannoon's picture

one of the rare days when ben speaks and gold pops a boner. odd.

reader2010's picture

Keep increasing the global marginal tax rate! Go Bernan!

magpie's picture

This morning i said -1,5 % on the S&P, now i say -1,2lol

Yen Cross's picture

 The Fed report will have a couple of hours (1/2 life) , then I'll short the hell out of it! This doesn't even qualify as a tape bomb.

Gas and food costs will go balistic, if the Fed. prints more. Steve Liesman needs to get a bungalow with Mario Draghi, so they can sit around the fire and pump each other up...

edb5s's picture

Try 20-30 minutes (1/2 life)

TruthInSunshine's picture

Scientific method for measuring FOMC jawboning half-life:


The time it takes Steve LIESman to ingest 2 quarts of Ben & Jerry's Chunky Monkey.

BeetleBailey's picture

STUPID action in FX....I mean...crazy YenCross.....what's your take on it?