I’m waiting for someone with too much time on their hands to confirm this, but I wouldn’t be surprised if today’s Fed report was the first time three voting members of the Board of Governors dissented. It’s getting to be like the House of Representatives over there!!
And what was their issue? As far as I can tell, they lost the fight against specifying the length of the “extended period” in which the Fed would not raise interest rates, which we now learn could last until mid-2013.
They’re worried about inflation but really, is that a reasonable fear in an economy with so much excess capacity, with GDP growth below 1% over the first half of this year, and over 16% of the workforce un- or underemployed?
Here’s a picture of a version of inflation that the Fed likes to look at—it’s the year-over-year change in the “market-based” personal consumer price index, leaving out food and energy. The Fed likes it because it leaves out components that are either less accurately measured (mostly imputed/made up prices…don’t ask) or too volatile to provide reliable info on price pressures.
Yes, there’s some acceleration at the end of the series, but a) from such a low level—well under the Fed’s 2% eyebrow-raising zone, b) just in the past few years you can see similar periods of acceleration that ultimately died out, and c) a little core inflation in the system is a good thing–it translates into lower real interest rates, which helps stimulate investment; it also makes life a little easier on those with debt burdens, as they can pay back loans a little more easily.
In terms of price pressure in this economy: nothing to see here folks…move along.