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     WASHINGTON (MNI) - The following are excerpts from the Federal Open 
Market Committee minutes of the October 31-November 1 meeting, published 
     Some members expressed concerns about the outlook for inflation 
expectations and inflation; they emphasized that, in considering the 
timing of further adjustments in the federal funds rate, they would be 
evaluating incoming information to assess the likelihood that recent low 
readings on inflation were transitory and that inflation was on a 
trajectory consistent with achieving the Committees 2 percent objective 
over the medium term. Several other members, however, were reasonably 
confident that the economy and inflation would evolve in coming months 
such that an additional firming would likely be appropriate in the near 
     Many participants judged that much of the recent softness in core 
inflation reflected temporary or idiosyncratic factors and that 
inflation would begin to rise once the influence of these factors began 
to wane. Most participants continued to think that the cyclical 
pressures associated with a tightening labor market were likely to show 
through to higher inflation over the medium term. 
     With core inflation readings continuing to surprise on the 
downside, however, many participants observed that there was some 
likelihood that inflation might remain below 2 percent for longer than 
they currently expected, and they discussed possible reasons for the 
recent short-fall. Several participants pointed to a diminished 
responsiveness of inflation to resource utilization, to the 
possibility that the degree of labor-market tightness was less than 
currently estimated, or to lags in the response of inflation to greater 
resource utilization as plausible explanations for the continued soft 
readings on inflation. A few noted that secular influences, such as the 
effect of technological innovation in disrupting existing business 
models, were likely offsetting cyclical upward pressure on inflation and 
contributing to belowtarget inflation. 
     In discussing the implications of these developments, several 
participants expressed concern that the persistently weak inflation data 
could lead to a decline in longer-term inflation expectations or may 
have done so already; they pointed to low market-based measures of 
inflation compensation, declines in some survey measures of inflation 
expectations, or evidence from statistical models suggesting that the 
underlying trend in inflation had fallen in recent years. In addition, 
the possibility was raised that monetary policy actions or 
communications over the past couple of years, while inflation was below 
the Committees 2 percent objective, may have contributed to a decline 
in longer-run inflation expectations below a level consistent with that 
objective. Some other participants, however, noted that measures of 
inflation expectations had remained stable this year despite the low 
readings on inflation and judged that this stability should support the 
return of inflation to the Committees objective. 
     ** MNI Washington Bureau: (202)371-2121 ** 
[TOPICS: MMUFE$,M$U$$$,MT$$$$]