FOMC Minutes: "More Bond Buying May Be Necessary"

Tyler Durden's picture

Some of the key headlines from the just released FOMC minutes via Bloomberg, which however don't show anything out of the ordinary:

  • A FEW FED OFFICIALS SAID MORE BOND BUYING MAY BECOME NECESSARY. So (1-Few) did not see it as necessary
  • FOMC PARTICIPANTS SAW `GRADUAL’ IMPROVEMENT IN LABOR MARKET
  • FOMC OFFICIALS SAW `MODERATE’ IMPROVEMENT IN HOUSEHOLD SPENDING
  • FOMC PARTICIPANTS SAW `DEPRESSED’ HOUSING SECTOR
  • FOMC OFFICIALS SAID GLOBAL FINANCIAL STRAINS POSED BIG RISKS
  • FOMC PARTICIPANTS FORECAST INFLATION WOULD REMAIN `SUBDUED’
  • SOME FED OFFICIALS FAVORED QE IF INFLATION FALLS, GROWTH SLOWS

Some interesting observations on the Fed's outlook on the balance sheet:

Most participants indicated that they expected that the normalization of the Federal Reserve’s balance sheet should occur in a way consistent with the principles agreed on at the June 2011 meeting of the FOMC, with the timing of adjustments dependent on the expected date of the first policy tightening. A few participants judged that, given their current assessments of the economic  outlook, appropriate policy would include additional asset purchases in 2012, and one assumed an early ending of the maturity  extension program.

And some more:

The Committee also stated that it is prepared to adjust the size and composition of its securities holdings as appropriate to promote a stronger economic recovery in a context of price stability. A few members observed that, in their judgment, current and prospective economic conditions—including elevated unemployment and inflation at or below the Committee’s objective—could warrant the initiation of additional securities purchases before long. Other members indicated that such policy action could become necessary if the economy lost momentum or if inflation seemed likely to remain below its mandate-consistent rate of 2 percent over the medium run.

Lacker's comment:

In contrast, one member judged that maintaining the current degree of policy accommodation beyond the near term would likely be inappropriate; that member anticipated that a preemptive tightening of monetary policy would be necessary before the end of 2014 to keep inflation close to 2 percent

And here is why the Fed, unlike the market, thinks the economy is not growing (unlike the NASDAPPLE):

A number of factors suggested that the pace of the expansion would continue to be restrained. Although some indicators of activity in the housing sector improved slightly at the end of 2011, new homebuilding and sales remained at depressed levels, house prices were still falling, and mortgage credit remained tight. Households’ real disposable income rose only modestly through late 2011. In addition, federal spending contracted toward year-end, and the restraining effects of fiscal consolidation appeared likely to be greater this year than anticipated at the time of the November projections. Participants also read the information on economic activity abroad, particularly in Europe, as pointing to weaker demand for U.S. exports in coming quarters than had seemed likely when they prepared their forecasts in November.

Full minutes:

 

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Conman's picture

What? No ZIRP4EVA till 2014? QE3 is a fantasy? Say it aint so uncle Benny! Learn from Greece and expel the dissenters!

true brain's picture

someone explain to me how bond purchases will stimulate the economy. any taker any geniuses out there.

bond purchase = inflation= increase commodities= decrease purchashing power of sheeple= decrease gdp= increased unemployment= more government handouts= more bond purchases. (circle to hell is complete.)

Conman's picture

Basic Keynesian theory. Dont want to bore everyone here just wiki it.

devo's picture

It doesn't. It raises nominal prices of assets, which makes people feel good, and Joe Six Pack doesn't understand inflation (i.e. that his basic goods increase more than his assets) so he thinks he's wealthier. Gold and land are the only good assets, and they will seize land if it gets real bad, so gold wins.

trav7777's picture

maybe, just maybe, bitchez

LongBalls's picture

WHEN WILL INVESTORS FIGURE OUT THAT THE ANNOUNCEMENT OF POSSIBLE QE IS HAVING THE SAME IMPACT AS ACTUAL QE? Like it matters anyway....THEY HAVE NOT STOPPED PRINTING!!!!!!!

Roy T's picture

FOMC PARTICIPANTS SAW `DEPRESSED’ HOUSING SECTOR

 

What???? We are on the verge on SPRING selling season!!! Everyone buy, buy, buy the homebuilders. Data be damned.  Hasn't the FOMC heard that the HBs are confident???

/snark

 

Conman's picture

Real as in yes he said it. Not as in he'll fall in line when push comes to shove.

TruthInSunshine's picture

MUST NOT LET INFLATION FALL FROM ITS CURRENT REAL LEVEL OF ABOUT 9% PER ANNUM IN THE U.S. IF THE GOAL OF DEBASING AMERICAN LIVING STANDARDS BY HALF IN THE NEXT FIVE YEARS TO KEEP THE BEST BANKING FRIENDS OF THE NEW YORK CITY BRANCH OF THE FEDERAL RESERVE FLUSH WITH FIAT IS TO BE REALIZED.

Allowing Americans an increase in purchasing power during the economic ass reaming session they're experiencing would be tragic.

*Sorry for the all caps above. It was cathartic.

RSloane's picture

ITS OKAY. EVENTUALLY YOU WILL COME TO TYPING FUCK IN CAPS IN EVERY POST BECAUSE ITS THE ONLY E THING THAT WILL MAKE YOU FEEL MOMENTARILY BETTER.

resurger's picture

FUCK EM' ALL!

TOMORROW THE MARKET'S WILL SURGE 2%, EXPECT EVERYTHING!

THEY HAVE A PLAN TO CRASH SILVER AND GOLD!

LowProfile's picture

FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK FUCK

 

...Yep, you're right.

Bwahaha WAGFDSMB's picture

The ONLY way to keep the global credit based monetary system from imploding is to have prices increase faster than the real economy shrinks as peak oil means growth in real terms is not coming back any time soon.

FUCK FUCK FUCK FUCK FUCK

TruthInSunshine's picture

This is the real reason The Bernank has to keep the inflation rate high; to offset the drop in real consumption, so that they can avoid talking about what has been economic contraction in real terms for some time now, and certainly far longer than two consecutive quarters.

JPM Hater001's picture

Did I mention the stock market looks drunk...again?????

NotApplicable's picture

You're not supposed to sober up and notice.

Manthong's picture

real or not real?

NOT REAL inasmuch as they won't announce anything anymore.

But they will buy, swap. twist, bend, fold and mutilate with a "balance sheet" expanded to infinity as that's all they have left. 

Don Smith's picture

So, why is silver selling off like a scalded dog?

kito's picture

because BEN IS NOT ENGAGING IN QE3 ANYTIME SOON!! its the same reason gold wont go much higher from here anytime soon. only promises, promises. learn from bill gross--he just made his second huge mistake relying on the idea that ben is a printing robot..........ben is getting the last laugh right now..............

fonzannoon's picture

They have been yelling about housing bottoming all day. All week. Homebuilders rabble rabble. Multi family rabble rabble. Sentiment rabble rabble. There will be no QE unless signs of deflation continue to show in housing. Then it's go time.

kito's picture

bernanke just admitted recently that housing may not be a safe investment. why would he then pump dollars into unsafe investment?  give it up. its not happening in the mortgage backed arena. and its not happening anywhere for a long time.

NotApplicable's picture

Why? Because Bernanke doesn't give two shits about returns, maybe? Because he is the buyer of last resort to keep the ponzi going.

I'll give you credit kito, your analysis is sound from a financial market perspective. Thing is, that market is being dismantled and transferred over to the political realm where ugly things such as insolvency (as well as GAAP-based accounting principles) are wholly moot.

One day though, the ruse will fold, and the CBs and/or their host govs. will be the only ones left standing with any assets. Because if they don't own it already, their agents do. Fekete's articles on ever-falling interest rates and the subsequent transfer/misallocations of capital it causes do an excellent job of describing this effect in detail.

jimmyjames's picture

because BEN IS NOT ENGAGING IN QE3 ANYTIME SOON!!

its the same reason gold wont go much higher from here anytime soon.

***********

i don't know what gold will do in the future-but your post sounds like you think the USA is the world-

What will China or India or the Euros do about gold?

I don't know that either-but i do know that the US population makes up only about 8% of the world gold assets-so i suspect that making a gold price call based on the Fed alone-could have a few at least for you-unseen consequences-

 

trav7777's picture

people realized how stupid silverbugz are and figured they'd take the opposite side of "dumb money"

Manthong's picture

Why is silver down?

Thin manipulated market..  asset movements..

Fundamentals won't kick in until a shake out in the wider market.. down with panic and manipulation, then up when Ben changes the BDI by filling the bulk ships up wih loose fill Benjamins.

ParkAveFlasher's picture

Harvey Organ called a "banker raid" within the week, BTFD

Don Smith's picture

Yeah, so has Turd and a number of others based on quite a few signs.  I'm expecting it, but that particular news didn't seem like the right timing to me.

Wolferl's picture

USA. USA USA. (Read: QE3.QE3.QE3). Rofl.

LawsofPhysics's picture

What, where did that long WWIII post go?  Same as it ever was.

Eally Ucked's picture

Let them buy everything they can because it may end shortly and USA won't look so good anymore in comparison with Europe. Let the recovery roll!

YesWeKahn's picture

"FOMC PARTICIPANTS FORECAST INFLATION WOULD REMAIN `SUBDUED’ "

Right, personal computer prices drop every year. People buy one of those every day.

Rent doesn't go up.

Food is free through food stamps

Gas is free because people ride bikes.

Awesome job, Bernanke.

SheepDog-One's picture

'Inflation remains subdued'...WELL at least for those who somehow dont ever have to buy anything like food, clothes, utilities, or gas.

RSloane's picture

Those don't count. They trade badly in the bond markets.

mktsrmanipulated's picture

infaltion in check...what are you fucking kidding me....how much is gas, food oh thats right they done count staples.....fucking gallon of milk doesnt count tell that to families....wtf

AL_SWEARENGEN's picture

This announcement explains why Silver got knee capped this afternoon.

firstdivision's picture

No big shocker there that more artificial inflation must be pushed in to support artificial inflation.  Leave it to the Fed to deny they laws of physics and logic in one statement.

mktsrmanipulated's picture

remember the only true way out of debt is to inflate out of it

Vincent Vega's picture

"More bond buying may be necessary". Bwahaaaaaaaa...there's a phucking suprise. Does this mean that foreign investors aren't going to step in and sop up the 90% of issuance the Fed has been buying? Gargantuan cluster phuck. Vaporize the Fed.

EscapeKey's picture

More bond buying? So I take it they've retired Operation Twist with immediate effect. Or does bond buying not count in newspeak when it's targeted at a specific maturity?

kito's picture

ha ha!! more bond buying may be necessary......cue the pavlovs response. all those on hopium thinking qe3 is coming can dream. now that ben has debunked the rumor of mortgage backed bond buying (essentially ruining bill gross) by admitting housing is a shitty investment, i wonder what rumor comes next.......  

Conman's picture

Careful with that, i can see some bad GDP prints coming that allows this dream to become reality. Almosts sounds like a setup to me.

azzhatter's picture

The only thing that's subdued about inflation is my dick because I can't afford V anymore

RobotTrader's picture

The Fed can overpower any and all selling by:

 

- China

- Japan

- Russia

- U.K.

- Taiwan

All they have to do is to hit the "Monetize Now!" button on the computer at the NY Fed.

Result?

Instantaneous buying of U.S. Treasuries, and the mo-mo funds follow in their footsteps.

How easy is that?

EscapeKey's picture

Yep, and all historical occasions of doing exactly this has always ended well (*).

(*) I might be fibbing here.

NotApplicable's picture

To be fair, I don't think Robo is an advocate in this case.

EscapeKey's picture

I don't think so either. I've seen some entirely level-headed posts by him. But all his statements like these essentially come down to pennies & steamroller.

SheepDog-One's picture

More bond MONETIZATION is DEFINITELY needed as we cant do anything else here at the FOMC except buy everything in sight daily with more imaginary money.

There, fixed it.