Comments from Wheeler:

  • Growth softened due mainly to lower terms of trade
  • Risks are that dairy prices remain weak and El Nino spurs drought
  • Could cut more aggressively and return to inflation target sooner but would create housing risks
  • Inflation expectations 'where we want them'

Cited six reasons for cutting today

  1. Inflation pressures are pretty muted
  2. Exchange rate has appreciated 6% since Sept
  3. Oil prices down about 6% since Sept
  4. We see volatility in milk prices
  5. There is uncertainty around the commodity price outlook
  6. There are risks around China and global growth

More comments:

  • We've seen real incomes rise significantly in the last few years
  • The Fed has done a good job trying to move market expectations
  • There's a heavy expectation, in excess of 75, the US will move in Dec
  • The exchange rate reaction is tough to anticipate
  • Impact on FX likely to depend on Fed statement

Wheeler sounds like FX trader with the way he was breaking down the FOMC decision.