6/30/05 FOMC statement intepreted

Posted on June 30, 2005

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What it really means is in brackets.

“The Federal Open Market Committee decided today to raise
its target for the federal funds rate by 25 basis points to 3-1/4
percent. The Committee believes that, even after this action, the
stance of monetary policy remains accommodative [We think
interest rates are too low] and, coupled with robust underlying growth
in productivity [We’re sorry you are working so hard], is
providing ongoing support to economic activity [You’re all in debt up to
your eyeballs]. Although energy prices have risen further [Duh],
the expansion remains firm and labor market conditions continue
to improve gradually [There are still plenty of unemployed people
who will work cheap]. Pressures on inflation have stayed
elevated, but longer-term inflation expectations remain well contained.

“The Committee perceives that, with appropriate monetary
policy action, the upside and downside risks to the attainment of
both sustainable growth and price stability should be kept roughly
equal [We’re still juggling]. With underlying inflation expected
to be contained, the Committee believes that policy accommodation
can be removed [We can raise your rates anytime we want to] at a
pace that is likely to be measured [We think it’s fun to prolong
your pain]. Nonetheless, the Committee will respond to changes in
economic prospects as needed to fulfill its obligation to
maintain price stability [We reserve the right to change our minds any
time].” End quote.

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