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The FOMC may see the recovery as “firmer,” but they’ve lowered their immediate growth expectations and expressed some concern around the rising threat of inflation.First, on growth. The Fed doesn’t see problems to their longer-term projections, but in the near-term:
The pace of economic activity appeared to have been a little slower around the turn of the year than the staff had anticipated at the time of the January FOMC meeting, and the near-term forecast for growth of real gross domestic product (GDP) was revised down modestly.
And on inflation, FOMC members are concerned about the rise in oil prices, and the hit on consumers:
The staff revised up its projection for consumer price inflation in the near term, largely because of the recent increases in the prices of energy and food. However, in light of the projected persistence of slack in labour and product markets and the anticipated stability in long-term inflation expectations, the increase in inflation was expected to be mostly transitory if oil and other commodity prices did not rise significantly further.
So, it remains, all about oil. But it’s only a few FOMC members, for now, calling for an end to easy policy in 2011:
To mitigate such risks, participants agreed that the Committee would continue its planning for the eventual exit from the current, exceptionally accommodative stance of monetary policy. In light of uncertainty about the economic outlook, it was seen as prudent to consider possible exit strategies for a range of potential economic outcomes. A few participants indicated that economic conditions might warrant a move toward less-accommodative monetary policy this year; a few others noted that exceptional policy accommodation could be appropriate beyond 2011.
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