Federal Reservations

I always read Jon Hilsenrath's articles on the Fed very closely. Right now the Fed seems uncertain about QE3, and the decision remains data dependent (as always) ... from Hilsenrath at the WSJ: Fed Takes a Break To Weigh Outlook

Fed officials meeting next week are unlikely to take any new actions to spur the recovery, and they are likely to emerge with a slightly more upbeat—but still very guarded—assessment of the economy's performance.
...
A big question is whether the Fed will launch a new bond-buying program in an effort to push down already low long-term interest rates.
...
Mr. Bernanke signaled to Congress last week that he had doubts about the sustainability of the employment gains. Fed officials aren't inclined to move while they try to solve the puzzle. "In light of the somewhat different signals received recently from the labor market than from indicators of final demand and production," he said, "it will be especially important to evaluate incoming information to assess the underlying pace of economic recovery."

Several economists still expect QE3 to be announced at one of the two day meetings in April or June - or maybe in Q3.

Goldman Sachs economists wrote on Friday:

We expect that the Fed will ultimately announce a return to balance sheet expansion sometime in the first half of 2012, likely including purchases of mortgagebacked securities (MBS).

And Merrill Lynch noted last week:

In our view, it is wishful thinking to believe the Fed will do QE when the data flow is healthy. We expect renewed QE only after Operation Twist ends in June ... only if the economy is slowing ... Under our growth forecast ... QE3 comes in September.

If the economy slows, and key inflation measures start falling again - then QE3 is very likely. But right now, with most data a little better than expected, and inflation a little higher than the Fed's target, the Fed is back to "wait and see". The next FOMC meeting is on Tuesday March 13th.

Yesterday:
• Summary for Week ending March 2nd
• Schedule for Week of March 4th

Originally from Calculated Risk

Earlier:
• Summary for Week ending March 2nd

The key report this week is the February employment situation report from the Bureau of Labor Statistics (BLS) scheduled for Friday.  Other reports include the February ISM service index on Monday, and the January trade balance report on Friday.

The Federal Reserve will release the Q4 Flow of Funds report on Thursday.

On Thursday, March 8th, the €200bn private sector Greek bond swap is scheduled.  Also on the 8th, the ECB holds a rate meeting.

----- Monday, Mar 5th -----
10:00 AM: ISM non-Manufacturing Index for February. The consensus is for a decrease to 56.1 from 56.8 in January. Note: Above 50 indicates expansion, below 50 contraction.

This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

10:00 AM: Manufacturers' Shipments, Inventories and Orders (Factory Orders) for January. The consensus is for a 0.9% decline in orders.

----- Tuesday, Mar 6th -----
No Releases Scheduled.

----- Wednesday, Mar 7th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index has been weak this year, although this does not include all the cash buyers.

8:15 AM: The ADP Employment Report for February. This report is for private payrolls only (no government). The consensus is for 200,000 payroll jobs added in February, up from the 170,000 reported last month.

3:00 PM: Consumer Credit for January. The consensus is for a $10.0 billion increase in consumer credit.

----- Thursday, Mar 8th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to be unchanged at 351,000.

12:00 PM: Q4 Flow of Funds Accounts from the Federal Reserve.

----- Friday, Mar 9th -----
8:30 AM: Employment Report for February. The consensus is for an increase of 204,000 non-farm payroll jobs in February, down from the 243,000 jobs added in January.

The consensus is for the unemployment rate to remain unchanged at 8.3%.

This second employment graph shows the percentage of payroll jobs lost during post WWII recessions through January.

The economy has added 3.17 million jobs since employment bottomed in February 2010 (3.66 million private sector jobs added, and 510 thousand public sector jobs lost).

There are still 5.2 million fewer private sector jobs now than when the recession started. (5.6 million fewer total nonfarm jobs).

8:30 AM: Trade Balance report for January from the Census Bureau.

Imports stalled in the middle of 2011, but increased towards the end of the year (seasonally adjusted). Exports are well above the pre-recession peak and up 9% compared to December 2010; imports are up about 11% compared to December 2010.

The consensus is for the U.S. trade deficit to increase to $49.0 billion in January, up from from $48.8 billion in December. Export activity to Europe will be closely watched.

10:00 AM: Monthly Wholesale Trade: Sales and Inventories for January. The consensus is for a 0.6% increase in inventories.

Originally from Calculated Risk

Fed's Beige Book:

Reports from the twelve Federal Reserve Districts suggest that overall economic activity continued to increase at a modest to moderate pace in January and early February. Activity expanded at a moderate pace in the Cleveland, Chicago, Kansas City, Dallas, and San Francisco Districts. St. Louis noted a modest pace of growth and Minneapolis characterized the pace of growth as firm. Economic activity rose at a somewhat faster pace in the Philadelphia and Atlanta Districts, while the New York District noted a somewhat slower pace of expansion. The Boston and Richmond Districts, in turn, noted that economic activity expanded or improved in most sectors.
...
Reports of consumer spending were generally positive except for sales of seasonal items, and the sales outlook for the near future was mostly optimistic.

And on real estate:

Residential real estate activity increased modestly in most Districts. Boston, Cleveland, Richmond, Atlanta, Kansas City, and Dallas reported growth in home sales, while New York noted steady to slightly softer home sales. Philadelphia reported strong residential real estate activity. In contrast, home sales declined in St. Louis and San Francisco noted that home demand persisted at low levels. Contacts' outlooks on home sales growth were mostly optimistic.
...
Commercial real estate markets displayed positive results in some Districts, as leasing showed overall improvement. Minneapolis, Richmond, Chicago, and Dallas noted increased leasing. Boston, however, reported mostly unchanged leasing fundamentals with some modest improvement since the previous report.

This was based on data gathered on or before February 17th. Mostly sluggish growth, but perhaps the most "positive" comments on residential real estate a long long time.

Originally from Calculated Risk

Q4 GDP revised up to 3.0% from 2.8% in advance estimate.

Chicago PMI comes in at 64.0 well above expectations.

Chicago Purchasing Managers reported the February CHICAGO BUSINESS BAROMETER rose to its highest level in ten months. The barometer also marked a 29th month of expansion and its fourth consecutive month above 60. Increases were seen in six of eight Business Activity Indexes, highlighted by a very large advance in Employment. BUSINESS ACTIVITY: • EMPLOYMENT highest since May 1984; • ORDER BACKLOGS moved back into expansion; • INVENTORIES dipped; • NEW ORDERS highest level since March 2011:

Note: Testimony starts at 10 AM ET.

Here is the CSpan feed

Here is the CNBC feed.

Prepared testimony from Fed Chairman Ben Bernanke: Semiannual Monetary Policy Report to the Congress

Originally from Calculated Risk

From the NY Fed: Delinquent Debt Shrinks while Real Estate Debt Continues to Fall

Aggregate consumer debt fell $126 billion to $11.53 trillion in the fourth quarter of 2011 according to the Federal Reserve Bank of New York’s latest Quarterly Report on Household Debt and Credit, a 1.1 percent decrease from the $11.66 trillion reported in the prior quarter’s findings.
...
Mortgage and home equity lines of credit (HELOC) balances fell a combined $146 billion, a sign that consumers continue to reduce housing related debt.

After a mild uptick in the third quarter, total household delinquency rates resumed their downward trend in the fourth quarter. The report finds that $1.12 trillion of consumer debt (or 9.8 percent of outstanding debt) is currently delinquent, with $824 billion seriously delinquent (at least 90 days late). Meanwhile about 2.2 percent of mortgage balances transitioned into delinquency during the fourth quarter, resuming the recent trend of reductions in this measure. However, delinquency rates remain elevated compared to historical figures.

"While we continue to see improvements in the delinquent balances and delinquency transition rates this quarter, there has been a noticeable decrease in the rate of improvement compared to 2009-2010," said Andrew Haughwout, vice president and economist at the New York Fed. "Overall it appears that delinquency rates are stabilizing at levels that remain significantly higher than pre-crisis levels."

Here is the Q4 report: Quarterly Report on Household Debt and Credit. Here are two graphs:

Click on graph for larger image.

The first graph shows aggregate consumer debt decreased slightly in Q4. From the NY Fed:

Aggregate consumer debt fell slightly in the fourth quarter. As of December 31, 2011, total consumer indebtedness was $11.53 trillion, a reduction of $126 billion (1.1%) from its September 30, 2011 level. Mortgage balances shown on consumer credit reports fell again ($134 billion or 1.6%) during the quarter; home equity lines of credit (HELOC) balances fell by $12 billion (1.9%). Household mortgage and HELOC indebtedness are now 11.0% and 11.7%, respectively, below their peaks. Consumer indebtedness excluding mortgage and HELOC balances again rose slightly ($20 billion or about 0.8%) in the quarter. Consumers’ non-real estate indebtedness now stands at $2.635 trillion. Student loan indebtedness rose slightly, to $867 billion.

The second graph shows the percent of debt in delinquency. In general, the percent of delinquent debt is declining, but what really stands out is the percent of debt 90 days delinquent (Yellow, orange and red). The percent of seriously delinquent loans will probably decline quicker now that the mortgage servicer settlement has been reached.

From the NY Fed:

As of December 31, 9.8% of outstanding debt was in some stage of delinquency, compared to 10.0% on September 30. About $1.12 trillion of consumer debt is currently delinquent, with $824 billion seriously delinquent (at least 90 days late or “severely derogatory”).
...
About 2.2% of current mortgage balances transitioned into delinquency during 2011Q4, reinstating the recent trend of reductions in this measure which had been temporarily reversed in 2011Q3. The rate of transition from early (30-60 days) into serious (90 days or more) delinquency also fell slightly, to 28.8%. This reduction in delinquency transitions was accompanied by an improved cure rate: 27.2% of mortgage balances in early delinquency became “current” during the fourth quarter.

There are a number of credit graphs at the NY Fed site.

Originally from Calculated Risk

Earlier:
• Summary for Week ending February 24th

The key reports this week are the January Personal Income and Outlays report, and the ISM Manufacturing survey - both will be released on Thursday. Other key reports include the Case-Shiller house price index on Tuesday, vehicle sales on Thursday, and the second estimate of Q4 GDP on Wednesday.

On Wednesday and Thursday, Fed Chairman Ben Bernanke provides the Fed's Semiannual Monetary Policy Report to the House and Senate respectively.

NOTES: The February employment report will be released the following week on Friday March 9th. Also both Fannie Mae and Freddie Mac are expected to report results this week.

----- Monday, Feb 27th-----
10:00 AM ET: Pending Home Sales Index for January. The consensus is for a 1.5% increase in the index.

10:30 AM: Dallas Fed Manufacturing Survey for February. The consensus is for 15.0 for the general business activity index, down slightly from from 15.3 in January.

11:00 AM: New York Fed to release Q4 2011 Report on Household Debt and Credit

----- Tuesday, Feb 28th -----
8:30 AM: Durable Goods Orders for January from the Census Bureau. The consensus is for a 1.0% decrease in durable goods orders.

9:00 AM: S&P/Case-Shiller House Price Index for December. Although this is the December report, it is really a 3 month average of October, November and December.

This graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indexes (the Composite 20 was started in January 2000).

The consensus is for a 0.7% decrease in prices (NSA) in December. I expect these indexes to be at new post-bubble lows, both seasonally adjusted (SA) and not seasonally adjusted (NSA). The CoreLogic index declined 1.4% decrease in December (NSA).

10:00 AM: Conference Board's consumer confidence index for February. The consensus is for an increase to 64.0 from 61.1 last month.

10:00 AM: Richmond Fed Survey of Manufacturing Activity for February. The consensus is for an increase to 13 for this survey from 12 in January (above zero is expansion). This is the last of the regional Fed manufacturing surveys for February, and the other surveys have indicated stronger expansion in February.

10:00 AM: Testimony, Fed Governor Elizabeth A. Duke, "The Housing Market", Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate

----- Wednesday, Feb 29th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index has been weak this year, although this does not include all the cash buyers.

8:30 AM: Q4 GDP (advance release). This is the second estimate from the BEA. The consensus is that real GDP increased 2.8% annualized in Q4 (same as advance estimate).

This graph shows the quarterly GDP growth (at an annual rate) for the last 30 years.

The Red column is the advance estimate for Q4 GDP.

9:45 AM: Chicago Purchasing Managers Index for February. The consensus is for an increase to 61.0, up from 60.2 in January.

10:00 AM: Testimony, Fed Chairman Ben S. Bernanke, Semiannual Monetary Policy Report to the Congress, Before the Committee on Financial Services, U.S. House of Representatives

2:00 PM: Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

----- Thursday, Mar 1st-----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for an increase to 355,000 from 351,000 last week.

8:30 AM ET: Personal Income and Outlays for January. The consensus is for a 0.5% increase in personal income in January, and a 0.4% increase in personal spending, and for the Core PCE price index to increase 0.2%.

10:00 AM: Construction Spending for January. The consensus is for a 1.0% increase in construction spending.

10:00 AM ET: ISM Manufacturing Index for February.

Here is a long term graph of the ISM manufacturing index. The consensus is for a slight increase to 54.6 from 54.1 in January.

All day: Light vehicle sales for February. Light vehicle sales are expected to decline slightly to 14.0 million from 14.13 million in January (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the January sales rate.

TrueCar is forecasting:

The February 2012 forecast translates into a Seasonally Adjusted Annualized Rate (SAAR) of 14.3 million new car sales, up from 13.3 million in February 2011 and up from 14.2 million in January 2012

10:00 AM: Testimony, Fed Chairman Ben S. Bernanke, Semiannual Monetary Policy Report to the Congress, Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate (repeat of previous day testimony).

----- Friday, Mar 2nd -----
No Releases Scheduled.

Originally from Calculated Risk

Earlier:
• Summary for Week ending February 17th

The key reports this week are the January existing home sales report on Wednesday and the new home sales report on Friday. The AIA's Architecture Billings Index for January will also be released on Wednesday.

On Friday, the US Monetary Policy Forum will be held in New York. The discussion will focus on a paper titled: “Housing, Monetary Policy and the Recovery”.

In Europe, the euro-area finance ministers will meet on Monday.
----- Monday, Feb 20th-----
All US markets will be closed in observance of Presidents' Day.

Euro-area finance ministers meet in Brussels to discuss the Greek debt deal.

----- Tuesday, Feb 21st -----
8:30 AM ET: Chicago Fed National Activity Index (January). This is a composite index of other data.

----- Wednesday, Feb 22nd -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the mortgage purchase applications index. This index has been weak this year, although this does not include all the cash buyers.

10:00 AM: Existing Home Sales for January from the National Association of Realtors (NAR).

The consensus is for sales of 4.69 million on seasonally adjusted annual rate basis.

Economist Tom Lawler estimates the NAR will report sales of 4.66 million, up slightly from December’s pace. It is possible that months-of-supply will be under 6 months for the first time since early 2006, and that listed inventory will be at the lowest level since early-2005.

During the day: The AIA's Architecture Billings Index for January (a leading indicator for commercial real estate).

----- Thursday, Feb 23rd -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for an increase to 355,000 from 348,000 last week.

10:00 AM: FHFA House Price Index for December 2011. This is based on GSE repeat sales and is no longer as closely followed as Case-Shiller (or CoreLogic).

11:00 AM: Kansas City Fed regional Manufacturing Survey for January. The consensus is for an increase in this survey to 9 from 7 in January (above zero is expansion).

----- Friday, Feb 24th -----
10:00 AM ET: New Home Sales for January from the Census Bureau.

This graph shows New Home Sales since 1963. The dashed line is the current sales rate.

The consensus is for a slight increase in sales to 315 thousand Seasonally Adjusted Annual Rate (SAAR) in January from 307 thousand in December. The consensus might be a little low based on the homebuilder confidence survey.

9:55 AM: Reuter's/University of Michigan's Consumer sentiment index (final for February). The consensus is for a slight increase to 72.9 from from the preliminary reading of 72.5.

During the day: 2012 US Monetary Policy Forum

[T]here will be a presentation on this year’s report on housing and the state of the recovery, which explores first, how bad is the physical and debt overhang of housing in the US economy? And secondly, does the peculiar state of the US housing market substantially limit the effectiveness of monetary policy that lowers long rates? The report titled "Housing, Monetary Policy and the Recovery," is being written by Mike Feroli (JP Morgan), Ethan Harris (Bank of America), Amir Sufi (Chicago Booth), and Ken West (University of Wisconsin). James Bullard (Federal Reserve Bank of Saint Louis) and John Williams (Federal Reserve Bank of San Francisco) will discuss the report.

Originally from Calculated Risk

Once again most of the economic data last week was above expectations, and the data suggests some increase in economic activity. We could blame the improvement on better than normal weather – and that was a factor – but with all the bad weather in 2011, it is about time the economy caught a little break.

The strongest data was probably housing starts, especially single family starts. But we have to be careful with the numbers – the weather played a role - and January is seasonally one of the weakest months of the year. The key months for housing starts begin in March. The increase in starts fits with the recent increase in the builder confidence index, but we still haven’t seen a pickup in new home sales (January new home sales will be released next week).

There was some disappointment with the retail sales report for January. Retail sales only increased 0.4%, and that was below expectations for the month. And there was disappointment with inflation as several key measures ticked up a little in January.

Other positive data included another drop in initial weekly unemployment claims, and, for manufacturing, an increase in both the Empire State and Philly Fed manufacturing surveys showing faster expansion in February.

Also the MBA released the results of the Q4 National Delinquency Survey, and mortgage delinquencies declined in Q4 – and according to MBA Chief Economist Jay Brinkmann, delinquencies are about “half way” back to normal. However the number of loans in the foreclosure process is still near record levels.

Overall this was another solid week. Here is a summary in graphs:

• Retail Sales increased 0.4% in January

Click on graph for larger image.

On a monthly basis, retail sales were up 0.4% from December to January (seasonally adjusted, after revisions), and sales were up 5.8% from January 2011. Sales for December were revised down from a 0.1% increase to "virtually unchanged".

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

Retail sales are up 20.7% from the bottom, and now 6.1% above the pre-recession peak (not inflation adjusted).

This was below the consensus forecast for retail sales of a 0.7% increase in January, but above the consensus for a 0.5% increase ex-auto.
All current retail sales graphs
• Housing Starts increased in January

Total housing starts were at 699 thousand (SAAR) in January, up 1.5% from the revised December rate of 689 thousand (SAAR). Note that December was revised up from 657 thousand.

Single-family starts declined 1.0% to 508 thousand in January, however December was revised up by 43 thousand from 470 thousand. There were the first two months above 500 thousand since the expiration of the tax credit.

This graph shows total and single unit starts since 1968. It now appears both multi-family and single-family starts are moving up, but from very low levels. This was above expectations of 670 thousand starts in January.
All Housing Investment and Construction Graphs
• MBA: Mortgage Delinquencies declined in Q4

From the MBA: Delinquencies and Foreclosures Decline in Latest MBA Mortgage Delinquency Survey

The MBA reported that 11.96 percent of mortgage loans were either one payment delinquent or in the foreclosure process in Q4 2011 (delinquencies seasonally adjusted). This is down from 12.41 percent in Q3 2011 and is the lowest level since 2008.

This graph shows the percent of loans delinquent by days past due.

Loans 30 days delinquent increased to 3.22% from 3.19% in Q3. This is at about 2007 levels.

Delinquent loans in the 60 day bucket decreased to 1.25% from 1.30% in Q4. This is the lowest level since Q4 2007.

There was a decrease in the 90 day delinquent bucket too. This decreased to 3.11% from 3.50% in Q3 2011. This is the lowest level since 2008, but still way above normal (probably around 1% would be normal).

The percent of loans in the foreclosure process declined slightly to 4.38% from 4.43%. The key problem remains the very high level of seriously delinquent loans and loans in the foreclosure process.

• Industrial Production unchanged in January, Capacity Utilization declines

This graph shows Capacity Utilization. This series is up 11.3 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 78.5% is still 1.8 percentage points below its average from 1972 to 2010 and below the pre-recession levels of 81.3% in December 2007.

Note: y-axis doesn't start at zero to better show the change.

This graph shows industrial production since 1967.

Industrial production was unchanged in January at 95.9; December was revised up sharply.

The consensus was for a 0.6% increase in Industrial Production in January, and for an increase to 78.6% for Capacity Utilization. Although below consensus, with the December revisions, this was about at expectations.
All current manufacturing graphs
• Weekly Initial Unemployment Claims declined to 348,000

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased this week to 365,250.

The 4-week moving average is at the lowest level since early 2008.

All current Employment Graphs

• Key Measures of Inflation increase in January

"According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index 0.2% (3.0% annualized rate) in January. The 16% trimmed-mean Consumer Price Index rose 0.2% (2.9% annualized rate) during the month. ... The CPI less food and energy increased 0.2% (2.7% annualized rate) on a seasonally adjusted basis."

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.4%, the trimmed-mean CPI rose 2.6%, and core CPI rose 2.3%. Core PCE is for December and increased 1.85% year-over-year. These measures show inflation is still above the Fed's 2% target.

• Empire State and Philly Fed Manufacturing Surveys show stronger expansion

From the NY Fed: Empire State Manufacturing Survey

The general business conditions index rose six points to 19.5, its highest level in more than a year.

This was above the consensus forecast of a reading of 14.1 (above 0 is expansion) and the highest level since June 2010.

From the Philly Fed: February 2012 Business Outlook Survey

The survey’s broadest measure of manufacturing conditions, the diffusion index of
current activity, edged higher from a reading of 7.3 in January to 10.2, its highest level since October.

This indicates expansion in Febraury, at a faster pace than in January, and slightly above the consensus forecast of 8.4.

Above is a graph comparing the regional Fed surveys and the ISM manufacturing index. The dashed green line is an average of the NY Fed (Empire State) and Philly Fed surveys through February. The ISM and total Fed surveys are through January.

The average of the Empire State and Philly Fed surveys increased again in February, and is at the highest level since April 2011.
All current manufacturing graphs
• NFIB: Small Business Optimism Index increased slightly in January

From the National Federation of Independent Business (NFIB): Small Business Confidence in a Lull

This graph shows the small business optimism index since 1986. The index increased to 93.9 in January from 93.8 in December. This is the fifth increase in a row after declining for six consecutive months.

The optimism index declined sharply in August due to the debt ceiling debate and has now rebounded to about the same level as early in 2011. This index is still low - probably due to a combination of sluggish growth, and the high concentration of real estate related companies in the index.

• Other Economic Stories ...
• NAHB Builder Confidence index increases in February; Highest in over four years
• Residential Remodeling Index increases 22.8% year-over-year in December
• From San Francisco Fed President John Williams: The Federal Reserve’s Mandate and Best Practice Monetary Policy
• Ceridian-UCLA: Diesel Fuel index declined 1.7% in January
• FHA REO Inventory declines to four-year low in December

Originally from Calculated Risk

Earlier today the BLS reported:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in January on a seasonally adjusted basis ... The index for all items less food and energy increased 0.2 percent in January.

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index 0.2% (3.0% annualized rate) in January. The 16% trimmed-mean Consumer Price Index rose 0.2% (2.9% annualized rate) during the month.
...
The CPI less food and energy increased 0.2% (2.7% annualized rate) on a seasonally adjusted basis.

Note: The Cleveland Fed has the median CPI details for January here.

On a monthly basis, the rate of increase was above the Fed's target.

Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.4%, the trimmed-mean CPI rose 2.6%, and core CPI rose 2.3%. Core PCE is for December and increased 1.85% year-over-year.

These measures show inflation is still above the Fed's 2% target.

Originally from Calculated Risk

From the Fed: Minutes of the Federal Open Market Committee, January 24-25, 2012. Excerpts:

In light of the economic outlook, almost all members agreed to indicate that the Committee expects to maintain a highly accommodative stance for monetary policy and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014, longer than had been indicated in recent FOMC statements. In particular, several members said they anticipated that unemployment would still be well above their estimates of its longer-term normal rate, and inflation would be at or below the Committee's longer-run objective, in late 2014. It was noted that extending the horizon of the Committee's forward guidance would help provide more accommodative financial conditions by shifting downward investors' expectations regarding the future path of the target federal funds rate. Some members underscored the conditional nature of the Committee's forward guidance and noted that it would be subject to revision in response to significant changes in the economic outlook.

The Committee also stated that it is prepared to adjust the size and composition of its securities holdings as appropriate to promote a stronger economic recovery in a context of price stability. A few members observed that, in their judgment, current and prospective economic conditions--including elevated unemployment and inflation at or below the Committee's objective--could warrant the initiation of additional securities purchases before long. Other members indicated that such policy action could become necessary if the economy lost momentum or if inflation seemed likely to remain below its mandate-consistent rate of 2 percent over the medium run. In contrast, one member judged that maintaining the current degree of policy accommodation beyond the near term would likely be inappropriate; that member anticipated that a preemptive tightening of monetary policy would be necessary before the end of 2014 to keep inflation close to 2 percent.

Originally from Calculated Risk