Fed Minutes: Conditions Warrant Low Fed Funds Rate, Thomas Hoenig Votes Against Action (3/16/2010)

From the FOMC Minutes on 3/16/2010, the Fed Governors (minus Thomas Hoenig) see "exceptionally low levels of the federal funds rate for an extended period". I'm going to chart out gold and oil contracts next to see if they sense inflation or deflation (or fiat money-flation).
"Committee Policy Action

In their discussion of monetary policy for the period ahead, members agreed that it would be appropriate to maintain the target range of 0 to 1/4 percent for the federal funds rate and to complete the Committee's previously announced purchases of $1.25 trillion of agency MBS and about $175 billion of agency debt by the end of March. Nearly all members judged that it was appropriate to reiterate the expectation that economic conditions--including low levels of resource utilization, subdued inflation trends, and stable inflation expectations--were likely to warrant exceptionally low levels of the federal funds rate for an extended period, but one member believed that communicating such an expectation would create conditions that could lead to financial imbalances. A number of members noted that the Committee's expectation for policy was explicitly contingent on the evolution of the economy rather than on the passage of any fixed amount of calendar time. Consequently, such forward guidance would not limit the Committee's ability to commence monetary policy tightening promptly if evidence suggested that economic activity was accelerating markedly or underlying inflation was rising notably; conversely, the duration of the extended period prior to policy firming might last for quite some time and could even increase if the economic outlook worsened appreciably or if trend inflation appeared to be declining further. A few members also noted that at the current juncture the risks of an early start to policy tightening exceeded those associated with a later start, because the Committee could be flexible in adjusting the magnitude and pace of tightening in response to evolving economic circumstances; in contrast, its capacity for providing further stimulus through conventional monetary policy easing continued to be constrained by the effective lower bound on the federal funds rate." (source: federalreserve.gov)

"Voting against this action: Thomas M. Hoenig.

"Mr. Hoenig dissented because he believed it was no longer advisable to indicate that economic and financial conditions were likely to warrant "exceptionally low levels of the federal funds rate for an extended period." Mr. Hoenig was concerned that communicating such an expectation could lead to the buildup of future financial imbalances and increase the risks to longer-run macroeconomic and financial stability. Accordingly, Mr. Hoenig believed that it would be more appropriate for the Committee to express its anticipation that economic conditions were likely to warrant "a low level of the federal funds rate for some time." Such a change in communication would provide the Committee flexibility to begin raising rates modestly. He further believed that making such an adjustment to the Committee's target for the federal funds rate sooner rather than later would reduce longer-run risks to macroeconomic and financial stability while continuing to provide needed support to the economic recovery." (source: FederalReserve.gov)

This is just a portion of the 9-page release which includes Developments in Financial Markets and the Federal Reserve's Balance Sheet, Staff Review of the Economic Situation, Staff Review of the Financial Situation, Staff Economic Outlook, Participants' Views on Current Conditions and the Economic Outlook. It embedded the PDF file below.