This page has been archived and commenting is disabled.
FOMC Minutes: "Appropriate To Provide Additional Monetary Policy Accommodation"
Here is the key section with highlights on the November 3 QE2 announement:
Participants discussed the medium-term outlook for monetary policy and
issues related to monetary policy implementation. Many participants
noted that if economic growth remained too slow to make satisfactory
progress toward reducing the unemployment rate or if inflation continued
to come in below levels consistent with the FOMC's dual mandate, it
would be appropriate to provide additional monetary policy
accommodation. However, others thought that additional accommodation
would be warranted only if the outlook worsened and the odds of
deflation increased materially. Meeting participants discussed several
possible approaches to providing additional accommodation but focused
primarily on further purchases of longer-term Treasury securities and on
possible steps to affect inflation expectations. Participants reviewed
the likely benefits and costs associated with a program of purchasing
additional longer-term assets--with some noting that the economic
benefits could be small in current circumstances--as well as the best
means to calibrate and implement such purchases. A number of
participants commented on the important role of inflation expectations
for monetary policy: With short-term nominal interest rates constrained
by the zero bound, a decline in short-term inflation expectations
increases short-term real interest rates (that is, the difference
between nominal interest rates and expected inflation), thereby damping
aggregate demand. Conversely, in such circumstances, an increase in
inflation expectations lowers short-term real interest rates,
stimulating the economy. Participants noted a number of possible
strategies for affecting short-term inflation expectations, including
providing more detailed information about the rates of inflation the
Committee considered consistent with its dual mandate, targeting a path
for the price level rather than the rate of inflation, and targeting a
path for the level of nominal GDP. As a general matter, participants
felt that any needed policy accommodation would be most effective if
enacted within a framework that was clearly communicated to the public.
The minutes of FOMC meetings were seen as an important channel for
communicating participants' views about monetary policy.
On inflation:
With respect to the statement to be released following the meeting,
members agreed that it was appropriate to adjust the statement to make
it clear that underlying inflation had been running below levels that
the Committee judged to be consistent with its mandate for maximum
employment and price stability, in part to help anchor inflation
expectations. Nearly all members agreed that the statement should
reiterate the expectation that economic conditions were likely to
warrant exceptionally low levels of the federal funds rate for an
extended period. One member, however, believed that continuing to
communicate that expectation in the Committee's statement would create
conditions that could lead to macroeconomic and financial imbalances.
Members generally thought that the statement should note that the
Committee was prepared to provide additional accommodation if needed to
support the economic recovery and to return inflation, over time, to
levels consistent with its mandate. Such an indication accorded with the
members' sense that such accommodation may be appropriate before long,
but also made clear that any decisions would depend upon future
information about the economic situation and outlook.
On the previously leaked GDP number:
In the economic forecast prepared for the September FOMC meeting, the
staff lowered its projection for the increase in real economic activity
over the second half of 2010. The staff also reduced slightly its
forecast of growth next year but continued to anticipate a moderate
strengthening of the expansion in 2011 as well as a further pickup in
economic growth in 2012. The softer tone of incoming economic data
suggested that the underlying level of demand was weaker than projected
at the time of the August meeting. Moreover, the outlook for foreign
economic activity also appeared a bit weaker. In the medium term, the
recovery in economic activity was expected to receive support from
accommodative monetary policy, further improvements in financial
conditions, and greater household and business confidence. Over the
forecast period, the increase in real GDP was projected to be sufficient
to slowly reduce economic slack, although resource slack was
anticipated to still remain elevated at the end of 2012.
The lone crusader against insanity continues to be Hoenig:
Voting for this action: Ben Bernanke, William C. Dudley, James Bullard, Elizabeth Duke, Sandra Pianalto, Eric Rosengren, Daniel K. Tarullo, and Kevin Warsh.
Voting against this action: Thomas M. Hoenig.
Mr. Hoenig dissented, emphasizing that the economy was entering the second year of moderate recovery and that, while the zero interest rate policy and "extended period" language were appropriate during the crisis and its immediate aftermath, they were no longer appropriate with the recovery under way. Mr. Hoenig also emphasized that, in his view, the current high levels of unemployment were not caused by high interest rates but by an extended period of exceptionally low rates earlier in the decade that contributed to the housing bubble and subsequent collapse and recession. He believed that holding rates artificially low would invite the development of new imbalances and undermine long-run growth. He would prefer removing the "extended period" language and thereafter moving the federal funds rate upward, consistent with his views at past meetings that it approach 1 percent, before pausing to determine what further policy actions were needed. Also, given current economic and financial conditions, Mr. Hoenig did not believe that continuing to reinvest principal payments from SOMA securities holdings was required to support the Committee's policy objectives.
All in all, just as expected
»
- 8901 reads
- Printer-friendly version
- Send to friend
- advertisements -
Now could be the time to investigte this stealth stuff.
Tyler, how about it?
The Fascists think they have an answer for everything.
That's not a bad assessment. I could see it playing out that way.
My guess though is that the 99'ers will be on the streets demanding overt QE2-like measures -- any promise at all -- that the O-administration will 100% positively absolutely four-square lock-stock-barrel quease all of us into a viable new economy with jobs for every family and a pony for every child.
It will all be empty rhetoric, of course. But I'm still looking for it. Lots of folk here seem to think that QE2 measures will be bad for the Dems in November. I don't see how they can go into elections and survive politically without an announcement sometime in the next 2 weeks. At the very least massive extensions of UE benefits, massive stimulatory tax cuts for wage earners, and another round of make-work infrastructure monies to prop up Detroit automakers.
It's an end-game now. It doesn't have to make sense. It doesn't even need to be demonstrably sane. It just has to buy time.
They'll jack the dollah either way to close in the green today.
Shorts are like frogs getting boiled in a pot of hot water.
Each day we climb a little higher and the water gets a little hotter.
Maybe one day all the shorts jump out of the pot at once and the market does a 300 point exhaustion blowoff?
That's what it's going to take. But don't look for that until Jan/Feb 2011. Until then, it's just higher and higher.
Cannot you just see Bernankie sitting there watching his personal account all day long as he pumps in 2 trillion into the economy. Just to see a $100,000. personal gain.
So, he destroys the life of Retired people. Starves the World with higher food prices, just so he can personally make $100,000.
He has got to be scaring the everlivin' shit out of the fixed incomers, with his zirp and his 3-5% inflation or bust.
No Social Security increase this year. Clearly they need to get their money off the sidelines and into equities.
The Fed will make a decision based on the mid-term election results.
Robotrader=Robocock?
Bernake pulling on Robotraders cock and the load going right into Geithners mouth with Obama providing janitorial cleanup services.
New York City, December 17, 1913
"'My Dear Senator Weeks:
"'Throughout my public life I have supported all measures designed to take the Government out of the banking business. This bill puts the Government into the banking business as never before in our history. "'The powers vested in the Federal Reserve Board seen to me highly dangerous especially where there is political control of the Board. I should be sorry to hold stock in a bank subject to such dominations. The bill as it stands seems to me to open the way to a vast inflation of the currency. "'I had hoped to support this bill, but I cannot vote for it cause it seems to me to contain features and to rest upon principles in the highest degree menacing to our prosperity, to stability in business, and to the general welfare of the people of the United States.
Very Truly Yours, Henry Cabot Lodge.'"http://hiwaay.net/~becraft/mcfadden.html
Now for something completly different:
I think the FED should spike interest rates for about 12 months to seperate the men from the boyz (women from the girlz). Get rid of the chafe (biz, consumers and municipals) that were only surviving by cheap money.
Much like the olde school private equity model, where you burden a company with high debt costs, which forces them to streamline operations and focus on real value drivers.
Then reduce debt costs again and the survivors would be lean mean and amped up for growth. Not to mention some tasty asset deals for those with cash.
There would be casualties and more unemployment but a much more efficient baseline ready for global growth.
Rewards the savers and punish the over leveraged.
I think the ECB is taking the long view and doing something similar.
right on. Raise rates a point and signal more to come. ignite some activity. And then the new GOP congress can lop 10% off the budget, promising more to come...our best last chance.
It looks like the QE2 is already priced into the market given today's ho hum reaction.
Kudos to the FED for doing what they said they would do.
Bad FED for not saying why how they think their methods will improve employment.
Psychopath Fed - what central bank wants to create inflation ? zirp is stealing from savers and retirees and bailing out the looters. Damn You Bernanke.
Does he attend the meetings by videoconference link from Mars? Or does "the economy" now just mean "BB balance sheets"?
And THIS is the best argument against the insanity of QE2??