The FOMC Minutes

The Fed might finally be coming around to the conclusion that inflation is less worrisome than it previously thought. The media will catch up much later. The most important parts of today's FOMC minutes are paragraph 21 and a portion of paragraph 22:

Paragraph 21

While participants noted some recent favorable data on core inflation and labor costs, upside risks to the outlook for underlying inflation remained a key concern. Wage gains had remained modest relative to continued strong productivity growth, suggesting that labor costs were not putting much upward pressure on prices. Indeed, core inflation continued to be subdued, and in recent weeks gasoline prices had unwound a significant portion of their steep increases. Nevertheless, there was a risk that the large cumulative rise in energy and petroleum product prices through the summer would be transmitted to core consumer prices. A number of firms had been reporting a greater ability to pass through increases in energy and other costs to customers, though evidently more so to other businesses than to consumers. A survey measure of the near-term inflation expectations of households had risen notably, but intermediate- and longer-term inflation expectations implied by Treasury security yields had remained fairly stable. It was noted, however, that longer-term expectations of inflation remained contained in the context of an increase in the extent of additional monetary policy tightening expected in financial markets.

Paragraph 22

...Some members cautioned that risks of going too far with the tightening process could also eventually emerge. Nonetheless, all members agreed to indicate at the conclusion of this meeting that a continued measured pace of policy firming remained likely...

As Truman said: "Give me a one-handed economist." The Fed needs to present boths sides of the argument to keep the financial markets from going overboard, but this is the first time in this tightening cycle that the risk of tightening too much has been raised.