After swapping out some of its members for the new year, the Federal Reserve's Open Market Committee met this week to discuss U.S. monetary policy. Yet reading its latest statement, the revised FOMC sounds a lot like the old FOMC. In fact, it seems the new members are even a little more confident than those who departed about the Fed's current helping of quantitative easing through asset purchases and language indicating prolonged ultra-low interest rates low.
The economic update provided by the FOMC contained no surprises for anyone who follows the economy. The committee reiterated that the slow recovery continues, but job creation has been too sluggish. The Fed still isn't worried about inflation, despite commodity price increases lately. The FOMC insists that "longer-term inflation expectations have remained stable, and measures of underlying inflation have been trending downward."
Perhaps the only significant change this month was the new-look committee's strong confidence in its strategy. Throughout much of 2010, Kansas City Fed President Thomas Hoenig had dissented with the rest of the committee members about the new quantitative easing program and language used to describe the interest rate policy. He has rotated out of the committee, however. Without his vote the new members all concurred with the policy plan in place.
This must come as a disappointment to inflation hawks. While they had an ally with Hoenig, they may have thought Philadelphia Fed President Charles Plosser would replace him as their advocate. He has been said to be the least comfortable of the now-sitting committee members when it comes to prolonged Fed intervention and endlessly expanding money supply. This meeting shows that he isn't so eager to disagree with the rest of his peers on the committee after all.
Unless we see a very significant uptick in economy activity, it doesn't seem likely that the FOMC will alter its course of quantitative easing through June. From the short statement it released today, all members appear to be on the same page. It will be interesting, however, to see if the full minutes paint the same picture. They'll be released in a few weeks.