The "surprisingly hawkish" part allegedly comes from this quote:

In considering the outlook for the labor market and the broader economy, a few members expressed the view that ongoing asset purchases would likely be warranted until about the end of 2013, while a few others emphasized the need for considerable policy accommodation but did not state a specific time frame or total for purchases. Several others thought that it would probably be appropriate to slow or to stop purchases well before the end of 2013, citing concerns about financial stability or the size of the balance sheet. One member viewed any additional purchases as unwarranted.

Various reports today focused entirely on this phrase. Bloomberg, for example, said "Fed board members said they will probably end their $85 billion monthly bond purchases, known as quantitative easing, in 2013, according to minutes of their Dec. 11-12 meeting released yesterday." Of course, they said nothing of the kind. This paragraph followed an extensive discussion about "several persistent headwinds" including the likelihood of tighter fiscal policy, and "[t]he staff viewed...the risks as skewed to the downside." There is far more negative in these minutes than there is positive. This illustrates the danger of taking a single quote out of context.

But what is even more important is this: the Evans Rule is now parameterized. The statement about when officials think that QE will end is simply a statement about when they think the parameters will be realized. But who cares? Private forecasters are no worse than Fed forecasters! Personally, I thought that we'd breach those parameters fairly quickly, and my note on the subject was called "Objects In Mirror May Be Closer Than They Appear." The error here seems to be that people expected QE-infinity really meant that the Fed would be easing forever, and that was incorrect a couple of weeks ago...not yesterday.

In any event, it doesn't matter because the real question isn't how much more water they add to the vat (that is, sterile reserves) but how (and if) they are able to remove the water that is already in the vat - which is trying very hard to get through the valve into M2. Again, I urge readers who took the end of the year off to look at my piece on this topic, "What Will the Fed Do When It's Finally Time To Tighten?" Money supply is accelerating again, +8.25% over the last year. And European M2 in November (numbers just out recently) accelerated to the fastest y/y pace since 2009.

If this makes investors concerned about the sketchy valuations of fixed income and stocks, then good - those markets are frothy and I will welcome prices where long equity investing holds more long-term promise than it currently does. But the reaction to the minutes, in my view, is mostly a case of people failing to understand Fedspeak.

(Note that this article also appears on my Wordpress site.)

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

• Ouch. #Canada added 1/3 as many jobs as the US did last month, and that nation has 1/9 of the population.
• Awful payroll data - 34k lower than expected with an additional -41k revision.
• Unemp rate fell from 8.254% to 8.111%, looks like a 0.2% fall but only b/c rounding. And it was all labor force shrinkage.
• Saw comment that the unemp # matters politically. No it doesn't. These are numbers. What matters is what people feel is happening. And
• ..and with employment, the man on the street doesn't need the government to tell him if the employment situation sucks.
• Weekly hours back to where we started the year. And Participation Rate now at the lowest level since 1979.
• One thing this ought to do is quiet the conspiracy theories about how Obama is cooking the numbers! Couldn't have cooked up worse.
• Internals even worse: I follow "Not in Labor Force, Want a Job Now". Highest since they strted asking that qn: [Note: I include this chart below]
• 7 million people aren't even looking for work, but want a job and would take one if offered. 7 million!
• Don't worry too much about hourly wages meaning deflation is coming. Wages follow #inflation, they don't lead.

Here's the chart referred to in the second-to-last tweet (Source: BLS):

(click to enlarge)

Republicans, don't cheer because we got a weak number. It isn't the number that causes trouble to the Obama campaign; it's the perception of the job market and that's not necessarily correlated to the number itself. Perceptions were already bad, and it's more likely this number is slightly understated.

Democrats, don't cheer because of the decline in the Unemployment Rate. You might think it makes a nice talking point, but if you crow about the improving labor market people will think you're an idiot. The labor market isn't improving. It's stagnating, at best; at worst, the crisis in Europe and the weakening of growth in Asia is dragging our increasingly export-sensitive economy down.

In fact, both sides of the aisle should be crying. But watch stocks jump! It's a little disappointing to me, actually, since more pundits will now get the QE3 call right. However, this number didn't "seal the deal" - it was already sealed, and the Fed was going to be easing next week no matter what today's number was.

I wrote a decent article last night, entitled "Side Bet With Ben?" You can find it here.

I think the SA people are trying hard to work out the workflow issues, so hopefully we can remedy this situation. Always remember you can get the article the moment I post it by following me on Twitter (@inflation_guy) or by subscribing to my blog directly - follow the link above and look for the subscription box. It's as free as Seeking Alpha.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Thursday's article was entitled "From May Day to Mayday."

Friday's article was "...And From Mayday to Mayans".

Note that you can subscribe to receive the article in your email by signing up on that website. The link is also distributed on my Twitter feed @inflation_guy.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

• Core CPI was +0.24%, barely missing an +0.3% print (interestingly, Bloomberg no longer calculates beyond the 1st decimal).
• Y/Y core 2.31%, which is "as expected"...except that economists were looking for a round UP to 2.3%.
• Core ex-housing is no longer as important as it was...since housing is close to fair now...but it's 2.36% y/y.
• ...that's actually the highest Core CPI y/y print yet. We've had 2.3%, 2.2%, 2.3% and 2.3%, but the first two 2.3% were up-rounders.
• ...and means 17 of last 18 months we've seen y/y core CPI increase.
• Accelerating groups: Apparel, Educ/Comm, Other (15.4%). Decelerating: Food/Bev, Transport, Recreation (37.4%). Unch: Med Care, Housing

The hurdle next month to push year-on-year core CPI higher for the 18th of the last 19th months is challenging. In May 2011, core CPI threw the highest print since 2008: +0.252% (rounded to +0.3%). That being said, this month's print was the third-highest since 2008, so it's not a complete reach.

Some observers will focus on the last 3 months of core CPI, which were +0.098%, +0.230%, and +0.242%, projecting to a relatively-calming 2.3% annualized - which is what it appears we've done, stabilize right on the Fed's target. But it appears the February number was the aberration. Annualizing the last four months would give us 2.4% (January's change was +0.218%), and annualizing just these last two months gives us 2.8%. I don't recommend playing around too much with annualization, but I point this out because popular opinion will try and pretend the +0.098% was wasn't an outlier.

Another way you can get a sense for the acceleration of inflation, and the easy potential for further inflation, is to look at the median monthly print and annualize. (This isn't the same as the Cleveland Fed's "Median CPI" - that indicator is looking at the median one-month change of all of the goods and services prices collected by the BLS.) What I am doing in the chart below is looking at the median month-on-month print from the last 12 monthly releases, and annualizing that figure. You can see that the number no longer looks like it has leveled off.

(click to enlarge)

What that suggests is that the recent failure of inflation to continue rising on a year-on-year basis is due to the low prints that are "tail events" on the downside, and not because the overall process of inflation has somehow been magically arrested at the Fed's target.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.