In his analysis of the minutes of Federal Open Markets Committee’s (FOMC) July/August meeting, Andrew Wilkinson, Chief Economic Strategist for Miller Tabek, wrote, “The August minutes deliver a new pair of words upon which it seems an imminent resumption of asset purchases is predicated.”
Wilkinson writes, “part of the reason that the stock market has felt the conviction to advance the rally into August is, in our opinion, based upon the notion that the Fed has made up its mind in favor of further intervention.”
He points out that the Fed said unless incoming data point to “substantial and sustainable” strengthening in the recovery more accommodation is likely to be “warranted fairly soon.”
Fairly soon is an interesting construction given that we are approximately 10 weeks away from the presidential election and nearly a year ago Congressional Republican leaders took the unprecedented step of writing Fed Chairman Bernanke “expressing their reservations” regarding additional Fed intervention. They wrote “the board should resist further extraordinary intervention in the U.S. economy,”
Wilkinson expects Bernanke to expand on this discussion at his Jackson Hole meeting next week.