Wednesday, January 30, 2008

Two comparisons of Fed statements eight days apart 

Language on Jan. 22:
Appreciable downside risks to growth remain. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks.
Translation: "Yeah, we're spooked too. More to come. Please stand by."

Language on Jan. 30:
Today�s policy action, combined with those taken earlier, should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks.
Translation: "Think this might be enough, but maybe not. If it ain't we'll do it again."

Again, from the 22nd:
The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets.
Today:
Financial markets remain under considerable stress, and credit has tightened further for some businesses and households. Moreover, recent information indicates a deepening of the housing contraction as well as some softening in labor markets.
I read that as the real bias statement, and I'll say we get another 25 bp at the next meeting, and sooner than that if we get a very bad jobs report in March (next meeting of the FOMC is March 20/21, almost two weeks after the Feb jobs figures come out. I assume they have an idea what the January data will look like, after the ADP report suggested +152k.)

Labels: ,


[Top]