Rates strategy - FOMC Minutes - Fed hawks paint themselves into a corner

Key takeaways from FOMC minutes that were released yesterday:

• 2010 GDP forecast revised to 2.8-3.5% from 2.5-3.5%. After stimulus and inventory rebuild fades, actual 2010 data will be at least a bit softer than average forecast and Fed hawks will be in a very uncomfortable position. Extended period of exceptionally low levels of the federal funds rate will last longer than many think.
• 2012 core CPE inflation forecast is just 1.0-1.7%, previously 1.2-1.9%. This supports our view that median FOMC member is still dovish and all the noise about the tightening is just an opinion of loud minority. 
• Bulldog fight under a carpet regarding the asset sales. Bernanke has failed to spread the coherent vision of quantitave easing theory to his fellow FOMC members. Only a minority has a conviction that QE is a necessary tool during the credit crisis: "A few suggested that the pace of asset sales, and potentially of purchases, could be adjusted over time in response to developments in the economy and the evolution of the economic outlook." The median FOMC member still believes the misguided notion that manipulation of short term risk free interest rates is all it takes to come out of the crisis, this misjudgement has seriously negative implications for risk assets.