Fed Minutes Show Concern Over Slowing Economic Growth

The Fed likes to debate, but interest rates are probably going to remain low for a long time. That was the immediate takeaway from the Federal Reserve minutes released at 2p.m. today.

The major indices climbed sharply higher after the release. By 2:30p.m., the S&P 500 and Dow had gained more than 0.9%. The Nasdaq climbed about 1.4%.

Investors on StockTwits.com cheered the post-Fed price action.

Vroom vroom Yellen power #FOMC $FED

— Becky Hiu (@BeckyHiu) Apr. 9 at 02:05 PM

Some investors are starting to think of Madam Fed Chairman Yellen as a dove with major muscle, capable of fighting off the biggest hawks on the FOMC. Judging from Yellen’s other speeches, cashtaggers said she seems determined that benchmark interest rates remain low until economic growth strengthens. And they noted that there was no talk of benchmark interest rates rising in the second half of next year.

FOMC minutes do not mention rate rise 6 months after QE ends and make no mention of any discussion o $MACRO $FED http://stks.co/i0U0F

— FinancialJuice (@FinancialJuice) Apr. 9 at 02:04 PM

Several $Fed official said forecasts overstated rate rise pace $$

— StreetInsider (@Street_Insider) Apr. 9 at 02:00 PM

In fact, some committee members worried that not enough accommodation was being made given the continued slack in the labor market and slowing economic growth. “A couple of participants expressed concern that inflation might not return to 2 percent in the next few years and suggested that a protracted period of inflation below 2 percent raised questions about whether the Committee was providing an appropriate amount of accommodation.”

According to the minutes, most of the FOMC members agreed that severe winter weather dampened economic activity during the early months of the year. But some also saw other signs of slowing growth in net exports and housing activity. Some also noted that revisions to prior economic data indicated the economic recovery was less robust than previously believed.

Run-away inflation, judging from the minutes, did not seem to be a major concern among most FOMC members. In fact, some participants expressed concern that inflation would not return to 2% in the next few years because of continued slack in the U.S. labor market. Some participants argued that the slowdown in China was helping keep world commodity prices down.

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