FOMC Minutes Unveil a Gloomy Outlook on Growth
April 8, 2008
The minutes from the March 18th FOMC meeting unveiled a predictably gloomy outlook on growth. A contraction in GDP is expected for the first half of 2008 with FOMC members less optimistic on the ability of net exports to combat the slowdown in GDP due to the expectation of slowing global growth. Most of the Fed members expect inflation to moderate, however, the recent and potential for USD weakness could push import prices up and fuel a spike in inflation. The two dissenters, Plosser and Fisher highlighted that a less aggressive monetary policy was the correct course of action, due to the concern that to wait for a clear sign that inflation expectations had “unmoored” may be too late to halt the pressures of the current easing bias. The impact of the latest FOMC minutes on the U.S. dollar was largely neutral as markets continue to await central bank meetings this week and the G7 meeting this weekend.