FOMC Minutes Released: Dissension To QE4EVA Growing

Tyler Durden's picture

While some were concerned at the Fed's new quantitative targets as suggesting early tightening, it appears (from the FOMC Minutes) that those fears were somewhat warranted (with most seeing QE ending in 2013):

  • *FED SAYS A FEW ON FOMC WANTED QE UNTIL ABOUT THE END OF 2013
  • *FED: SEVERAL ON FOMC BACKED QE HALT OR CUT WELL BEFORE 2013 END
  • *ALMOST ALL FOMC MEMBERS SAW POTENTIAL QE COSTS AS INCREASING

The punchline: "several" means more than just QE4 hater Jeff Lacker are turning hawkish. Though, even with the risks, they want moar. Pre-FOMC Minutes: ES 1460, 10Y 1.86%, EUR 1.3108, Gold $1674. Post: ES -6pts, 10Y +5bps, EUR -40 pips, Gold -$10.

 

Here is the punchline from the report:

In their discussion of monetary policy for the period ahead, all members but one judged that continued provision of monetary accommodation was warranted in order to support further progress toward the Committee’s goals of maximum employment and price stability. The Committee judged that such accommodation should be provided in part by continuing to purchase MBS at a pace of $40 billion per month and by purchasing longer-term Treasury securities, initially at a pace of $45 billion per month, following the completion of the maturity extension program at the end of the year. The Committee also maintained its existing policy of reinvesting principal payments from its holdings of agency debt and agency MBS into agency MBS and decided that, starting in January, it will resume rolling over maturing Treasury securities at  auction. While almost all members thought that the asset purchase program begun in September had been effective and supportive of  growth, they also generally saw that the benefits of ongoing purchases were uncertain and that the potential costs could rise as the size of  the balance sheet increased. Various members stressed the importance of a continuing assessment of labor market developments and reviews of the program’s efficacy and costs at upcoming FOMC meetings. 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.

Full FOMC minutes (link)

FOMC Mins December