Fed Minutes Emphasize Transparency

The Fed says it wants to provide plenty of warning before it pulls the monetary policy plug.

May 21, 2014 at 3:57PM

The Fed released its latest Federal Open Market Committee (FOMC) meeting minutes today (link opens as PDF), hinting at a slow-and-steady path for monetary policy in the months to come. The minutes from the April 29-30 meeting noted that "[p]articipants generally agreed that starting to consider the options for normalization at this meeting was prudent, as it would help the Committee to make decisions about approaches to policy normalization and to communicate its plans to the public well before the first steps in normalizing policy become appropriate."

For investors and analysts, the FOMC's special emphasis on transparency and due notice came as a welcome note. While a pullback in quantitative easing, or an increase in the federal funds target rate, is a sign that the Fed believes markets can handle themselves and the future is bright, the action can still have a slight short-term negative effect, as markets recover from less "easy money" around.

The minutes also revealed more uncertainty about the Fed's "threshold numbers" that it has previously referenced as lines beyond which it would raise interest rates. Generally, the Reserve has stated it would like to see inflation rise to a 2% annual rate, and would like the unemployment rate to drop below 6.5%. Currently, inflation stands at 1.95% and the unemployment rate at 6.3% -- close enough to make many investors nervous about the Fed's next move.

US Unemployment Rate Chart

US Unemployment Rate data by YCharts

In its announcement on April 30, the Committee noted it was expanding beyond these metrics alone, considering "a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments." These latest minutes reveal an especially wide divide on the effects of long-term unemployment, hinting that the Committee's recent labor market optimism may be more fragile than previously expected.

The minutes noted:

A number of participants expressed skepticism about recent studies suggesting that long-term unemployment provides less downward pressure on wage and price inflation than short-term unemployment does ... a few participants pointed out that because of downward nominal wage rigidity during the recession, wage increases are likely to remain relatively modest for some time during the recovery, even as the labor market strengthens.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information