August 8 · Published August 29, 2006
Statement·Presser·Minutes
BBBen S. BernankeAugust 8, 2006 FOMC Minutes
Our reading
The minutes read somewhat more hawkish relative to the statement because they reveal that **many members viewed the decision to hold rates steady as a "close call" and explicitly noted that "additional firming could well be needed."** While the statement frames the pause as a balanced judgment that inflation pressures "seem likely to moderate," the minutes expose deeper internal concern about elevated core inflation, upward revisions to unit labor costs, and a broad-based pickup in prices—suggesting a higher threshold of worry and a stronger inclination toward future tightening than the public statement conveyed.
Our reading compares the minutes of the August 8 FOMC meeting with the FOMC statement issued at the end of that meeting, three weeks before the minutes were published.
Vote
- Ben S. Bernanke
- Susan S. Bies
- Timothy F. Geithner
- Jack Guynn
- Donald L. Kohn
- Randall S. Kroszner
- Jeffrey M. Lacker ↑ dissented
- Mr. Lacker dissented because he believed that further tightening was needed to bring inflation down more rapidly than would be the case if the policy rate were kept unchanged. The inflation outlook had deteriorated in the intermeeting period; the recent surge in core inflation had persisted and appeared to be broad-based, while the revision of the national income and product accounts indicated a recent upswing in compensation and unit labor costs. Although real growth was likely to be somewhat lower in coming quarters, in his view it was unlikely to moderate by enough to bring core inflation down. He noted, moreover, that real short-term interest rates had fallen in the intermeeting period and were still low relative to rates typically associated with sustained expansions.
- Sandra Pianalto
- Kevin Warsh
- Janet L. Yellen
From the minutes
FOMC minutes
Notation Vote
By notation vote completed on July 19, 2006, the Committee unanimously approved the minutes of the FOMC meeting held on June 28-29, 2006.
Vincent R. Reinhart
Secretary
What changed from the previous meeting’s minutes
- The FOMC voted to hold the federal funds rate at 5-1/4 percent, after raising it 25 basis points in June.
- Mr. Lacker dissented, favoring further tightening, marking the first dissent in the period.
- The policy directive changed from "increasing" to "maintaining" the federal funds rate at 5-1/4 percent.
- The statement omitted the phrase about moderation in aggregate demand helping to limit inflation pressures.
- The staff forecast for real GDP growth was revised down due to annual national income account revisions.
- Core PCE inflation was seen as running at or above 2 percent for over two years, with unit labor costs revised up.
Summary generated automatically from the two documents.