Fed Spoils New Year's Party

News reports stated the stock market's FOMC-related woes were about slower-than-expected growth due to the Fed's comment that "developments in the housing market continued to weigh heavily on economic activity."

But given that half of the headlines said that inflation was the catalyst for concern and the other half said growth, there probably was not much reality in either analysis -- and the Fed added a housing-related caveat as well, noting that "there were some indications that home sales might be starting to stabilize."

In truth, the minutes were more of the same -- status quo -- as the FOMC retained its tightening bias.

The FOMC "remained concerned about the outlook for inflation," and "nearly all participants viewed core inflation as uncomfortably high and stressed the importance of moderation," according to the minutes. FOMC members said risks remain to the upside for inflation, and that remains "of greatest concern."

On the growth side, the message was balanced. "Several members judged that the subdued tone of some incoming indicators meant that the downside risks to economic growth in the near term had increased a little and become a bit more broadly based than previously thought." The FOMC also said that recent indicators had been "mixed."

Buried on page three, meanwhile, was an overlooked gem of insight, says Joe Brusuelas, chief economist at IDEAglobal. The FOMC discusses "measurement issues" of automobile output, adding that these issues "likely caused an overstatement of the rate of increase in real GDP in the third quarter, and the gradual unwinding of those effects would probably lead to an understatement of real GDP growth over the next several quarters."