The FOMC Holds Target Rate at 5.25%

No surprise, the Fed left the target rate at 5.25%. The statement is essentially unchanged and Inflation is highlighted. The statement says:

1. The statement on economic growth has changed from "Recent indicators have been mixed" to "Economic growth has slowed in the first part of the year" indicating that uncertainty over slowing has been resolved by new data.

2. The statement about inflation changed slightly, with the opening sentence changed from "Recent readings on core inflation have been somewhat elevated" to "Core inflation remains somewhat elevated," and they continue to expect moderation of inflation in the future. However, the statement notes the potential for high levels of resource utilization to sustain inflation pressures.

3. The balance of risks is still tilted toward inflation. There is no signal that a rate cut is contemplated anytime soon.

4. There was no dissent.

Here are the differences between the last statement and this one:

May 9, 2007 Statement	March 21, 2007 Statement
The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.	The Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent.
Economic growth slowed in the first part of this year and the adjustment in the housing sector is ongoing. Nevertheless, the economy seems likely to expand at a moderate pace over coming quarters.	Recent indicators have been mixed and the adjustment in the housing sector is ongoing. Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters.
Core inflation remains somewhat elevated. Although inflation pressures seem likely to moderate over time, the high level of resource utilization has the potential to sustain those pressures.	Recent readings on core inflation have been somewhat elevated. Although inflation pressures seem likely to moderate over time, the high level of resource utilization has the potential to sustain those pressures.
In these circumstances, the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information	No change
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Cathy E. Minehan; Frederic S. Mishkin; Michael H. Moskow; William Poole; and Kevin M. Warsh.	No change

Comments

[calmo]

Well, well, well..."Economic growth has slowed in the first part of the year" indicating that uncertainty over slowing has been resolved by new data.GDP advance of 1.3 is due for a positive bounce on the new (and not for your plebian eyes) data. What could it B, fellow plebs?
Heavy hurricane season ahead (see if Katrina wasn't a GDP bounce)?
Bill Gates and Warren Buffet announce that they are going to set an example by distributing their entire net worth?...it being ridiculously easy for them, they want to start from scratch again and really defeat us psychologically.
Well, how low did that GDP number have to go to not elicit just this response?

[kthomas]

0?

[calmo]

Talk about the winning the 8th degree black belt in the Melvinzed Post, kt...we B struck and awed. [Look, there's the ko'ed melvin in the corner scrambling to get his bearings on a new Expansive Direction.]
Today's retail numbers show that the "new data" that promises to buff up that sad-looking advance GDP is not retail and not likely to be then, an invigorated PCE. That takes care of 3/4 of the GDP which leaves.. ..military escalation and Gates's preliminary (Hell, "advance") request for $700B to support military adventures in Iraq and Afghanistan, could be it.
Surely those fcbs won't allow us this luxury...

[me]

"GDP advance of 1.3 is due for a positive bounce on the new"

Seems like it will go down to .7 after today's trade deficit numbers.

[KThomas]

My inner-Melvin simply responded.

calmo, need your input in the Rule of Law thread.

[calmo]

me, I see that Roubini and even some investment houses are thinking the same thing. I have been led astray by (failing to distinguish Mark's interpretation from the report) this bit:The statement on economic growth has changed from "Recent indicators have been mixed" to "Economic growth has slowed in the first part of the year" indicating that uncertainty over slowing has been resolved by new data. Still, not sufficiently slow or resolved slow to ease --a direction which I think would be an admission that housing is more than an "ongoing adjustment", that a major spillover is underway, that the dollar is headed even lower...
There is an over-rated fascination with this recession signal from a zero GDP, no? If housing is the main driver of this economy, it has been in recession for nearly a year. If you were in the auto industry (esp a Big Three worker) you'd also have been in a recession (a longer one). The buoyant market (maybe not today's 150pt dip) I suppose distracts people, giving them the impression that some are doing well. [Can we have those numbers again on who owns how much of the stock market to remind ourselves what a poor signal this has become for the general economy?]