Goldman's Reaction To The FOMC Minutes

Since it is now obvious to even the back office that Jan Hatzius makes monetary policy in the US (just note the spike in QE3 anticipating factors following his weak assessment of the weak Services ISM earlier), it probably makes sense to present his response to the policy that he through his predecessor Bill Dudley, helped enact. Below is the Goldman take on the FOMC minutes. Ignore the house of mirrors effect.

Minutes of FOMC Meeting - Ongoing Debate

1. Minutes from the March 15 FOMC meeting indicated greater division among Fed official about the policy outlook, in line with recent public comments. In particular, they stated that "A few participants indicated that economic conditions might warrant a move toward less-accommodative monetary policy this year." Note that this may refer to ending MBS reinvestment rather than raising the funds rate.

2. Despite stronger calls for tightening from a minority on the committee, many members seemed comfortable with the policy stance. Officials saw "significant slack in resource utilization", and expected that "underlying inflation likely would remain subdued for some time". As in the post-meeting statement, they said that it would be important to track measures of inflation expectations, but otherwise they saw the recent rise in headline inflation as transitory. Meeting participants also thought the decline in the unemployment rate contrasted with other labor market indicators, which "showed more-modest improvements".

3. Finally, the Board staff left its forecasts for activity later in the year broadly unchanged. The minutes noted that, in the staff's view, the drag from higher oil prices would be offset by higher household net worth and a weaker dollar.

While he bow down to the Viceroy of the West Printers, we can't help but wonder how a weaker dollar offset lower purchasing power? That's ok - since we have no Ph.D. it is obviously beyond our meager brain to comprehend this offset which only the "blessed ones" can grasp.