June 24–25 · Published July 16, 2008
Statement·Presser·Minutes·Policy
BBBen S. BernankeJune 24–25, 2008 FOMC Minutes
Our reading
The minutes read somewhat more hawkish relative to the statement because they reveal a deeper and more divided discussion among participants about the **intensified upside risks to inflation and inflation expectations**, including explicit concerns about the potential for an upward drift in long-run inflation expectations and the possibility that the next policy move could be a rate increase. In contrast, the statement is more balanced and forward-looking, emphasizing that inflation is expected to moderate later this year and next year, while the minutes detail the heightened debate over whether the current stance of policy—especially the negative real federal funds rate—might be too accommodative and could lead to higher trend inflation.
Our reading compares the minutes of the June 24–25 FOMC meeting with the FOMC statement issued at the end of that meeting, three weeks before the minutes were published.
Vote
- Ben S. Bernanke
- Richard W. Fisher ↑ dissented
- Mr. Fisher dissented because he preferred an increase in the target federal funds rate at this meeting. While the financial system was still frail and downside risks to growth remained, the risk that inflation would fail to moderate as expected by the Committee had increased substantially over the intermeeting period. Relatively strong demand for oil and other commodities abroad, as well as increased labor and other operating costs in the emerging economies, was boosting prices of globally traded goods and services. Mr. Fisher was especially concerned about behavioral changes among business operators that appeared to be accommodating inflationary pressures. In particular, firms increasingly appeared to be planning to pass through their higher input costs to final goods prices in order to protect their profit margins. Overall, Mr. Fisher viewed inflation expectations as becoming less well anchored. To help restrain inflation expectations and inflation, Mr. Fisher felt it would be appropriate for the Committee to tighten the stance of monetary policy.
- Timothy F. Geithner
- Donald L. Kohn
- Randall S. Kroszner
- Frederic S. Mishkin
- Sandra Pianalto
- Charles I. Plosser
- Stern
- Kevin Warsh
From the minutes
FOMC minutes
By notation vote completed on May 20, 2008, the Committee unanimously approved the minutes of the FOMC meeting held on April 29-30, 2008.
_____________________________
Brian F. Madigan
Secretary
What changed from the previous meeting’s minutes
- The FOMC voted to hold the federal funds rate at 2 percent, after cutting it 25 basis points in April.
- The statement removed language emphasizing downside risks to growth, citing diminished risks.
- The statement added that upside risks to inflation and inflation expectations had increased.
- Mr. Plosser voted with the majority in June, after dissenting in favor of no change in April.
- Mr. Fisher dissented in June preferring a rate increase, after dissenting for no change in April.
- The June minutes noted the next policy change could well be an increase in the funds rate.
Summary generated automatically from the two documents.