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Parsing the Fed

Tuesday, May 03, 2005 | 04:55 PM

It is Fed today. As usual, the WSJ's provides an excellent dissection of the Fed Statement:

WSJ: "THE FEDERAL RESERVE'S STATEMENTS reflect how the members of the central bank's Federal Open Market Committee perceive the economy. Their words have world-wide impact and the slightest changes are scrutinized for clues about where interest rates may be headed.

The May 3 statement, issued after the third meeting of the year, announced that the Fed was raising its key short-term interest rate by one-quarter point to 3.0%, its eighth increase in a row. The central bank showed more concern with oil prices affecting purchasing power, but didn't signal any plans to alter its current campaign of gradual interest-rate increases -- a change some were expecting. In a strange twist, the Fed at first omitted a key phrase on inflation from the previous statement - "Longer-term inflation expectations remain well contained." But then, late in the day, the Fed said the omission was a mistake and issued a revised statement. Below is a look at differences between the March statement and the May one. (Note: All bolding shown below appeared on the Fed statement.)

click for larger graphic