The markets may be looking many months ahead but the Fed is looking at the here and now and the near future. The FOMC minutes show that the while most members see a slow second half recovery they see the outlook remaining weak for sometime and the downside risks to remain substantial. The Fed mulled buying large quantities of longer-term securities. The Fed also surprisingly raised concerns over the stronger dollar from the summer months, saying it held back exports. Global demand will likely remain weak, they said. None of this is a surprise given that they cut rates to zero and vowed to leverage the Fed balance sheet further.
The dollar comments are somewhat surprising in that the Fed rarely spends much time on the greenback, but it is notable that they were noting the drag on the economy from dollar strength suggesting they had no real concerns with the weak dollar early in 2008.
