The minutes of the Federal Open Markets Committee's meeting on August 10 show officials confused and struggling with the issue of high unemployment. Rather than focusing on solutions, discussion centered on why it was happening, the minutes, released Tuesday, August 31, showed.
Two camps emerged, with one arguing uncertainty about regulation and recently passed health-care reform had businesses skittish. Others said the job market was paralyzed by "mismatches between unemployed workers' skills and the needs of employers with job openings."
Officials concluded the economy "was operating farther below its potential than thought, that the pace of recovery had slowed in recent months, and that growth would be more modest during the second half of 2010 than they had anticipated."
As a result, the committee maintained the target range for the federal funds rate at between 0% and 0.25% and anticipated that economic conditions, including low rates of resource utilization, subdued inflation trends and stable inflation expectations are likely to warrant exceptionally low levels of the federal funds rate for an extended period.
"Bottom line, the committee is walking a fine line between appearing desperate and appearing reassuring," says Fred Taylor, principal and cofounder of Denver-based Northstar Investment Advisors, LLC. "With so much uncertainty, no one wants to invest before the November elections. [Thomas] Hoenig was the only one who stuck his neck out."
