(RTTNews) - There was a lot of information packed into the minutes released on Tuesday by the Federal Open Market Committee, note the analysts at FTN Financial Group.

The FOMC was in general agreement that economic output was weakening on all fronts. Investors, consumers, manufacturers and policy makers were becoming more pessimistic. Fed officials became resigned to a long, severe recession. The two possible bright spots were cheaper gasoline boosting real gasoline sales and a possible increase in service spending in December.

Bear in mind the Fed did not know how bad Christmas sales were in the end. In fact, at the time of the meeting there was still some reason to be hopeful.

There is quite a bit of information on the policy front in the minutes.

The Fed will continue to run an enlarged balance sheet for some time to come. The FOMC is considering the possible benefits of setting a comprehensive target for bank reserves or the monetary base. Even if they opt against this, economists will be tracking both now that the Fed has revealed they are being used in policy decision making. The objection to targeting reserves or the MB is - as some FOMC meeting participants noted - the fact that excess reserves could get stuck in the banking system if banks cannot be convinced to lend.

The return to normal conditions will be signaled by a scaled back Fed balance sheet, a reduction in policy tools and a return to fed funds rate targeting. Until then, the FOMC decided an indefinite range for the funds target best signaled its commitment to its various liquidity programs.

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Posted in Categories: Economy, Releases, USA.

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