Fed's Not Forgetting Inflation

Though the Fed is expecting more normal conditions to return, the process could take some time, particularly in the subprime mortgage space. The group will meet again Sept. 18, and many traders and analysts are expecting a reduction in the fed funds target rate then or even before.

The minutes noted that demand for housing in the second quarter was held down by higher interest rates and tightening credit conditions in the subprime market. Sales of new and existing homes in the quarter fell substantially from their average levels in the back half of last year.

House-price appreciation continued to slow, with some measures again showing declines in home values, the minutes said. Nonresidential construction outlays rose rapidly.

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