The Fed's Caution

The Fed released the minutes from its June committee meeting yesterday, and the upshot is that the members saw no need to change what they were doing as far as jump-starting the American economy. But at the same time, there are many signals of the economy softening, if not entering another slowdown:

* The Fed's unemployment forecast for 2010 dropped from 9.1 to 9.5 percent to a new estimate of 9.2 to 9.5 percent.

* Retail purchases dropped for a second straight month. They were down 0.5 percent in June, after falling by 1.1 percent in May.

* The overall forecast for 2010's GDP growth, which had been in the range of 3.2 to 3.7 percent, has slipped down to 3 to 3.5 percent.

All of these changes are fairly marginal, but they're also all in the wrong direction. And even more troubling is that there isn't any countervailing evidence, no indicator leading strongly in a positive direction. The Fed noted that "further policy stimulus might become appropriate if the outlook were to worsen appreciably." So apparently what we're seeing is the economy worsening, but not at an appreciable level.