Dollars and Jens
Tuesday, August 10, 2004
Federal Reserve Open Market Committee action
The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 1-1/2 percent.
The Committee believes that, even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity.
And it's well within its rights to believe that.

As for the committee not liking to spook the markets, note this excerpt
The economy nevertheless appears poised to resume a stronger pace of expansion going forward. Inflation has been somewhat elevated this year, though a portion of the rise in prices seems to reflect transitory factors.

The Committee perceives the upside and downside risks to the attainment of both sustainable growth and price stability for the next few quarters are roughly equal.
and compare to this. And the "measured pace" bit is still there, too.

The out futures for the funds target seemed to find the statement more hawkish than expected; I know that some bond traders were looking for an acknowledgement of last Friday's weak report, and "the pace of improvement in labor market conditions has slowed" may have been less than they were looking for. Another sign that the market viewed this as hawkish: the iShares Japan ETF dipped on the news, as might be expected from perceived relative strength of the dollar against the yen. That very kind of arcane datum is exactly the reason I'm here.

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