The Fed's staff forecasts is bullish as ever:
The information reviewed at the September 22-23 meeting suggested that overall economic activity was beginning to pick up...The participants current outlook confirm that the Fed is a boat drifting in the mist of data. It does not sound too optimistic fine-reading this FOMC quote:
In the forecast prepared for the September FOMC meeting, the staff raised its projection for real GDP growth over the second half of 2009 and over 2010.
Despite these positive factors, many participants noted that the economic recovery was likely to be quite restrained.followed by lingering fears of inflation despite a contraction in money supply M2.
A few continued to see some risk of substantial further disinflation, but that risk had eased somewhat further over the intermeeting period. Over a longer horizon, a few felt the risks were tilted to the upside.OK, this comes long after the admission that the Fed mainly tries to contain expectation inflation expectations - all the time padding their own shoulder to have been successful on this front in the past.
It does not change my view that surging commodity prices will surprise the world within the next 12 months, re-charging inflation again with oil buldifing a base above $70 a barrel.