Fed Minutes

The staff still expected that the pace of economic activity through 2011 would be sufficient to reduce the existing margins of economic slack, although the anticipated decline in the unemployment rate was somewhat slower than in the previous projection.

Karim writes:

Staff still forecasting above trend growth, though not as firm as before. Activity indicators coming in as expected, with financial strains in May and June the cause for the revision.

Table below is average of FOMC members, not staff, but appears to have similar profile. Average expectations for 2011 growth at 3.85% from 3.95% prior..

A few participants cited some risk of deflation. Other participants, however, thought that inflation was unlikely to fall appreciably further given the stability of inflation expectations in recent years and very accommodative monetary policy. Over the medium term, participants saw both upside and downside risks to inflation.

Deflation talk still seems contained to a ‘few’ members.

Members noted that in addition to continuing to develop and test instruments to exit from the period of unusually accommodative monetary policy, the Committee would need to consider whether further policy stimulus might become appropriate if the outlook were to worsen appreciably.

This was only mention of QE2 – not very extensive.