This latest release tempered signs of economic resuscitation with causes for concern. The end result is an expectation for a casual stroll toward a balanced economy:

“Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.”

The Federal Reserve also reminded us that the first of many emergency measures will shut down next week. The last measure will shut down on June 30th (the Term Asset-Backed Securities Loan Facility). These activities will finally set the stage for a rate hike at some point in the future…assuming of course the economy does not experience a relapse. The Federal Reserve also assured markets that rates will remain low for an “extended period.” Now that we know “extended period” means no sooner than six months, we should expect no rate hikes until after the end of all emergency financial measures.

This statement did contain one surprise. One of the voting members objected to the latest policy action:

“Voting against the policy action was Thomas M. Hoenig, who believed that economic and financial conditions had changed sufficiently that the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted.”

We have witnessed members of the Federal Reserve wonder aloud about the proper time to begin raising rates. However, this is the first time that a member has voted outright against the current fund rate policy. Consider this one more inch toward a rate hike.

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