Fed Minutes Offer Less Than Solid Perspective on Economy

While the headlines after the Federal Reserve Board’s Federal Open Market Committee meeting in September focused on the first interest rate cut since the early days of the Covid-19 pandemic, that wasn’t the main message from the central bank. In its usual convoluted way, the Fed seemed to be signaling there is solid ground for the U.S. economy to make a soft landing.

It is a hallmark of Fed monetary policy releases to couch policymakers’ perspective in vague and innocuous language. And the minutes from the two-day meeting September 17 and 18 were no exception.

But this time, instead of its usual reliance on “modest” and “moderate” to describe the state of the economy, Jerome Powell and his colleagues opted for something more substantial but equally vague: “solid.”

According to the staff review of economic conditions at the meeting, U.S. gross domestic product “expanded solidly” through the first three quarters of 2024 and labor market conditions were “solid” as well. Likewise, the economic outlook presented by Fed staff was for the economy to “remain solid.”

But what exactly does that mean? Just like its use of “moderate” when referring to economic growth, the central bank carefully chose language that is neither positive nor negative and can be taken to mean whatever policymakers want it to mean.

A quick look in the dictionary does not offer much guidance to what the Fed is talking about.

The first definition under the word “solid” is something having three dimensions, namely length, breadth and depth. But that is hardly applicable to the economy. Nor is the second definition of being “not hollow.”

Moving further down the list of definitions offers little comfort and even less clarity.

The economy is neither “firm, hard or compact in substance” nor is it “whole or entire” as in a “solid hour” or even “real or genuine” in the sense of “solid comfort.”

Diving deeper into the weeds to trace the roots of the word, we find the Latin “solidus,” meaning dense or compact. But both those terms have a variety of meanings, none of which really tell us anything about the state of the economy.

It’s only when we get all the way down to words related to “solid” where some clues possibly emerge – including “decent,” “good,” or “satisfactory.” Of course, if that is truly what Fed policymakers meant, they could have easily used any of those terms as well instead of using “solid” a dozen times in the meeting minutes.

With so many people waiting earnestly for the Fed to take action on interest rates and the significance of the rate cut, it would have been nice for the central bankers to be more explicit in their explanations and do the American people a solid and just say what they mean.