[fed reserve report] selected issues october 25th

# The President recently signed the Financial Services Regulatory Relief Act of 2006, which gave the Federal Reserve discretion, beginning October 2011, both to pay interest on reserve balances and to reduce further or eliminate reserve requirements.

# Real consumer spending appeared to regain some steam in September after a lackluster August. Although nominal retail sales fell noticeably in September, the steep drop in gasoline prices more than accounted for the decline.

# The U.S. international trade deficit widened to another record in August, reflecting a surge in imports that more than offset a sizable jump in exports.

# Mixed indicators in Canada and the United Kingdom suggested that output growth in those countries remained around recent rates.

# The staff forecast prepared for this meeting indicated that growth of real GDP had slowed further in the third quarter, reflecting both a significant drag from the continuing contraction in residential construction and a steep decline in motor vehicle assemblies.

# Participants continued to expect the economy to expand at a rate close to or a little below the economy's long-run sustainable pace over coming quarters.

# Uncomfortably high levels of inventories within the auto sector had prompted a sharp reduction in light vehicle production in the third quarter.

# Both data and reports from businesses indicated that the labor market remained tight.

# All meeting participants expressed concern about the outlook for inflation.

# Nearly all members favored keeping the target federal funds rate at 5-1/4 percent at this meeting.

Layman’s summary is that it’s steady as she goes, except for the worry about eliminating reserve requirements in 2011, as part of their strategic plan.