What we can learn from new details released Tuesday on the central bank's June meeting
The Federal Reserve just isn't sure what's going on. Although the minutes from its June meeting make some broad assertions about the U.S. economy, the economists appear to be squinting at a future clouded by uncertainty. Rather than dwell on any one thing the Fed concludes, here are ten takeaways from the discussion notes released Tuesday afternoon.
1. The Recovery Has Softened
We already knew this, but the Fed affirms our fears. It cites that pretty much every sector was having trouble in the second quarter, from housing to retailers to government to industrial firms. Its economists remain adamant that the recovery is moving forward, they just believe that the pace has weakened due to transitory factors. They didn't expect this, which is why their projections weakened.
2. Exit Strategy Is Clear
Over the past year or two, we've been provided clue after clue about how the Fed will wean the U.S. economy from the massive credit stimulus it has provided since the financial crisis. For the first time, however, the Fed minutes clearly and concisely explain the process. It will go something like this: 1) stop reinvesting maturing assets, 2) kill the language asserting that interest rates will remain extremely low for an "extended period" and begin draining reserves, 3) raise the fed funds rate and further tweak the level of reserves 4) begin selling mortgage securities. Only the timing of when its exit will commence remains unclear, both to us and the Fed.