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FOMC Minutes Reveal "Most Fed Officials Saw QE Tapering In 2013"

Tyler Durden's picture




 

In what had already been exposed as a 'contentious' meeting the minutes of the last Un-Taper FOMC meeting show a Fed in turmoil...

  • *MOST FED OFFICIALS SAW QE TAPERING THIS YEAR, HALTING MID-2014
     
  • *FOMC FORECAST `GRADUAL ABATEMENT' OF HEADWINDS SLOWING GROWTH
     
  • *A NUMBER OF FOMC PARTICIPANTS SAW RISING FISCAL POLICY RISK
  • *SEVERAL FOMC PARTICIPANTS SAW FINANCIAL CONDITIONS AS TIGHTER

Of course, the question is - will Yellen be a consensus-seeker or dictator (like Bernanke clearly was in this meeting)?

Pre - S&P 500 Futs 1653, 10Y 2.66%, 10/17 bill 40bps, EUR 1.3515, Gold $1310

Some additional color:

  • *SEVERAL FOMC PARTICIPANTS SAW HIGHER RATES AS RISK TO HOUSING
  • *FOMC SAW `SIGNIFICANT RISKS' TO ECONOMY, INCLUDING FISCAL DRAG
  • *FOMC MEMBERS SAW DOWNSIDE RISKS TO ECONOMY AS HAVING DIMINISHED

So in a nutshell - the Fed is all over the place!

Key sections:

On which securities would have been tapered, if tapering is now not fully off the table:

With regard to adjustments in the pace of asset purchases, whether at this or a future meeting, a few participants expressed a preference for not cutting MBS purchases but reducing purchases only of Treasury securities initially, with the intent of continuing to support the recovery in the housing sector. However, the appeal of including both types of securities in any reduction was also mentioned.

On the confusion among FOMC members:

... questions were raised about the effects on the housing sector and on the  broader economy of the tightening in financial conditions in recent months, as well as about the considerable risks surrounding fiscal policy. Moreover, the announcement of a reduction in asset purchases at this meeting might trigger an additional, unwarranted tightening of financial conditions, perhaps because markets would read such an announcement as signaling the Committee’s willingness, notwithstanding mixed recent data, to take an initial step toward exit from its highly accommodative policy. As a result of such concerns, a number of participants thought that risk-management considerations called for a cautious approach and that, in light of the ambiguous cast of recent readings on the economy, it would be prudent to await further evidence of progress before reducing the pace of asset purchases.
 

On the Fed eatings its punchbowl and drinking it too:

With many outside observers expecting a decision to reduce purchases at this meeting, some participants emphasized a need to clearly communicate the rationale behind any decision not to do so, in order to avoid conveying a message of pessimism regarding the economic outlook or to reinforce the distinction between decisions concerning the pace of purchases and those concerning the federal funds rate.

On why tapering will be delayed again... and again... and again:

One participant suggested that postponing the reduction in the pace of asset purchases would also allow time for the Committee to further discuss and to implement a clarification or strengthening of its forward guidance for the federal funds rate, which could temper the risk that a future downward adjustment in asset purchases would cause an undesirable tightening of financial conditions

On the conflicting message the Fed admits it sends to the market:

With the markets apparently viewing a cut in purchases as the most likely outcome, it was noted that the postponement of such an announcement to later in the year or beyond could have significant implications for the effectiveness of Committee communications. In particular, concerns were expressed that a delay could potentially undermine the credibility or predictability of monetary policy by, for example, increasing uncertainty about the Committee’s reaction function and about its commitment to the forward guidance for the federal funds rate, with the result of an increase in volatility in financial markets. Moreover, maintaining the pace of purchases could be perceived as a sign that the FOMC had turned more pessimistic about the economic outlook.

On why even the Fed knows it has blown "forward guidance" :

Finally, it was noted that if the Committee did not pare back its purchases in these circumstances, it might be difficult to explain a cut in coming months, absent clearly stronger data on the economy and a swift resolution of federal fiscal uncertainties. Most of the participants leaning toward a downward adjustment in the pace of asset purchases also indicated that they favored a relatively small reduction to signal the Committee’s  intention to proceed cautiously.

Full minutes below (link):

 

 

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Wed, 10/09/2013 - 14:04 | 4038576 ZippyBananaPants
ZippyBananaPants's picture

What ever happened to Mitt Romney?

Wed, 10/09/2013 - 14:08 | 4038583 AllThatGlitters
AllThatGlitters's picture

Look at gold react in real time:

Live Spot Gold Chart: http://www.pmbull.com/gold-price/

Wed, 10/09/2013 - 14:10 | 4038593 King_of_simpletons
King_of_simpletons's picture

This is all moot now. We have Armageddon Yellen now

Wed, 10/09/2013 - 14:12 | 4038604 NotApplicable
NotApplicable's picture

Well, I obviously don't know what "gradual abatement" means, because as far as I can see, the headwinds are only gaining strength.

Then again, I'm not one of those pedigreed "Pee Aych Dees," so what do I know?

Wed, 10/09/2013 - 14:19 | 4038612 Arius
Arius's picture

which reminds us of Mr. Dullard (a peedigreed Pee Ayech Dee i might clarify) promise TO TAPER IN OCTOBER ... you think he will do so next week? or the week after?

my money is before the default ... just to spice it up a liitle bit and keep the promise to the people!

Wed, 10/09/2013 - 14:24 | 4038632 john39
john39's picture

yellen, like obama, won't decide anything.   this is all show, just like the government.

Wed, 10/09/2013 - 15:14 | 4038815 Boris Alatovkrap
Boris Alatovkrap's picture

Boris is confusing! For moment, if pretend Federal Reserve Private Central Bank is even slight of interest to good of AmeriKa and Global Economy, why is sit around in FOMC, why talk interest rate, taper, inflation, deflation? Only important thing in economy is productivity, and only effect of Central Bank is foster trust. Taper, no taper, inflation, deflation, is symptom - not cure... Maybe truth is Central Bank is only interest of private bank and gobble gook talk is for consumption of silly ivory tower maKro eKonomist.

Wed, 10/09/2013 - 15:22 | 4038862 King_of_simpletons
King_of_simpletons's picture

Look, the automatic stock market is set to go up up and up, with programmed slumps. The rest is all dog and pony show for the jobless people by the jobless people. The government and the federal reserve together is one gigantic shit pit where jobless people bicker, whine and complain and go home to bang their mistresses.

 

 

Wed, 10/09/2013 - 14:17 | 4038614 smlbizman
smlbizman's picture

doesnt matter what the puppets think...the puppeteer moves the strings...

Wed, 10/09/2013 - 15:43 | 4038966 Boris Alatovkrap
Boris Alatovkrap's picture

Move along, be good puppet!

Wed, 10/09/2013 - 14:32 | 4038658 Stoploss
Stoploss's picture

Yep, but this is old news, everybody new it was going to be her.  There's no tapering, ever.

It's distraction for Barrycare.

STIFF'S R US CREMATORIUM - (WE STACK 'EM HIGH SO YOU DON'T HAVE TO)

                                    IRS VOLUME DiSCOUNT OFFERED

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Bring on the Barrycare!!!!

Wed, 10/09/2013 - 15:11 | 4038791 Boris Alatovkrap
Boris Alatovkrap's picture

Kubuki Theatre!

Wed, 10/09/2013 - 15:23 | 4038874 Diogenes
Diogenes's picture

What have a couple of fat guys in diapers butting heads got to do with it?

Wed, 10/09/2013 - 15:49 | 4038992 Boris Alatovkrap
Boris Alatovkrap's picture

You are confuse "Sumo" with "Kabuki". But, "fat guy in diaper" is have as much to do with health of economic as false government metric.

Wed, 10/09/2013 - 14:19 | 4038598 Shell Game
Shell Game's picture

"Look at gold react in real-time."


Does time even matter at the bottom of riverbeds and lakes? 

Wed, 10/09/2013 - 14:20 | 4038622 AllThatGlitters
AllThatGlitters's picture

Indeed it does, if what's sitting on top of those beds is going to get bigger.

Wed, 10/09/2013 - 14:28 | 4038640 Shell Game
Shell Game's picture

It should get bigger irregardless of manipulated price movement.

Wed, 10/09/2013 - 14:22 | 4038624 SheepDog-One
SheepDog-One's picture

Most Fed officials saw Fed tapering in 2013, QE ending around mid 2014....but don't worry, most Fed officials have now been re-educated...enjoy the rest of your day peons and know QE will never taper, nor end.

LOL 

Wed, 10/09/2013 - 15:06 | 4038577 Quinvarius
Quinvarius's picture

So default by mid-2014 it is.  I mean seriously.  They want to taper Treasuries and not MBS?  Talk about wishful thinking.  Please, Fed, stop buying the ten year and enjoy drinking from the firehose of worthless MBS you will unleash as the benchmark 10 yr goes through the floor.  The Fed will enjoy Obama's wrath as another roadblock to his budget is thrown out in front of him because they stopped buying his Treasury debt.  It is like the Fed doesn't even understand how the markets work or what they have done.  Not gonna happen.  So the Fed doesn't like being pegged and now they have to talk all crazy.  Fine.  I know what has to be done and they will do it every time.  Keep up that 85B until the day you ramp it to 100B.  The spice must flow.

Wed, 10/09/2013 - 14:06 | 4038578 1835jackson
1835jackson's picture

dicktator

Wed, 10/09/2013 - 14:04 | 4038580 schoolsout
schoolsout's picture

dicktater

Wed, 10/09/2013 - 14:11 | 4038582 Dr. Engali
Dr. Engali's picture

I think you meant to say dyketator Tyler. And yes, Yellen be a dyketator. I was going to say that there is no way they would let the first woman fuck things up, but then I had to redact that thought after considering the performance of the first black president.

Wed, 10/09/2013 - 14:07 | 4038587 Cursive
Cursive's picture

Helicopter Ben will hand the reigns over to Magellan Yellin.  We're headed for unchartered territory.

Wed, 10/09/2013 - 14:08 | 4038588 Madcow
Madcow's picture

Yellen will have the easiest job in the world.  On her first day, she can just compose one single tweet:  "tapering to come any minute now - as soon as it is clear that growth has returned."  She can just send out that same tweet ever day for the next 6 years. Done and done. 

 

 

Wed, 10/09/2013 - 14:10 | 4038590 Dolus
Dolus's picture

Just like QE abatement in Sep 2013. 

Wed, 10/09/2013 - 14:08 | 4038591 IrishSamurai
IrishSamurai's picture

Dick-eater.  

 

Specifically Mr. Blankfein and Mr. Dimon.

Wed, 10/09/2013 - 14:12 | 4038600 TaperProof
TaperProof's picture

BULLSHIT.. not happening.  What the fed says can be safely ignored at this point.

Wed, 10/09/2013 - 14:14 | 4038602 SheepDog-One
SheepDog-One's picture

Times are different now, Bernank got away with it for a while, everyone was all standing in awe of ''Helicopter Ben, The Princeton wizard professor with all the answers and cure-alls due to his the top expert knowledge of The Great Depression', yadda yadda....what's Yellen? Some old moneybag whore, that's all. If anything, the bickering and squabbling and dissent will escalate big time.

Wed, 10/09/2013 - 14:14 | 4038605 polo007
polo007's picture

According to CIBC World Markets:

https://app.box.com/s/1hz07yh07pze8p6awmhi

Enter Yellen: What a New Fed Chair Could Mean for Policy

The nomination of Janet Yellen as Fed Chair, to be announced today according to the White House, and likely to be approved early in 2014, does not usher in a new era of more dovish policy for the Fed as some in markets may fear. Yellen’s FOMC voting record has matched Bernanke’s and her speeches have largely echoed the themes of her predecessor. Bonds may see a temporary boost on the appointment of Yellen to the helm (pending Senate confirmation), given her support of the Fed’s overall dovish stance. However, assuming an amicable passing of the current debt ceiling and budgetary deadlock, we see longer-term risks of a sell-off as the drag from fiscal policy eases in 2014, giving even a Yellen-led Fed justification to scale back bond-buying by early next year.

Profile: Vice Chair of the Federal Reserve, formerly Chair of the White House Council of Economic Advisers under Clinton and President of the Federal Reserve Bank of San Francisco.

No Perma-Dove: A look at Yellen’s speeches may lead some to believe that the next Fed Chair is a staunch monetary policy dove. Her emphasis on the destructive nature of long-term unemployment and the cyclical drivers of higher joblessness has highlighted the need for continued easy policy. She has also stated that the Fed’s growing balance sheet is not a roadblock to an eventual smooth exit from QE, and that there is no evidence that asset
purchases are harming financial market functioning. And as Chair the FOMC Subcommittee on Communications, she has been a driving force in formulating tools, including threshold guidance, which have been used to reinforce the Fed’s easing.

But Yellen is no easy-money ideologue. With the Fed facing the greatest downturn since the Great Depression, Yellen’s dovish views and speeches have simply hewn closely to the Fed’s overall dovish stance. A look at her voting record shows votes cast in line with the FOMC majority, including Ben Bernanke, with not a single dovish dissent since the onset of the crisis. Her lack of concern about inflation has been vindicated by the facts, with annual CPI trending below the 2% mark. And she hasn’t always been the voice for more monetary policy accommodation on the Fed. There have been episodes in her career when she has taken a more hawkish tilt, including the May 1996 FOMC meeting where she pointed to the “…need to be nervous about rising inflation”, later that year describing labour markets as “undeniably tight”.

Yellen’s Preferred Employment Indicators: One factor explaining Yellen’s support of the Fed’s easy policy is the continued stagnation in the jobs market. In a March 2013 speech, Janet Yellen identified her preferred indicators for gauging whether there has been a substantial improvement in the labour market outlook justifying a tapering in Quantitative Easing.

- Hiring as a share of employment (Chart 1, left)

- Job quits as a share of employment (Chart 1, right)

- Nonfarm payrolls (Chart 2, left)

- The pace of spending growth (Chart 2, right)

Only the quit rate, which could signal that workers are more optimistic about finding new jobs, has been trending stronger in recent months, with the remaining measures of job market health either flat-lining or softening relative to earlier in the year. So rather than a hawkish/dovish ideological slant, the cold hard fact that the US jobs market has yet to show signs of measurable improvement is likely the key factor motivating Yellen’s support for continued QE bond buying.

For now, fiscal uncertainty continues to cloud the outlook for US economic growth. But if policymakers in Washington are able to extend the debt ceiling and agree on a fiscal deal without new cuts to 2014 spending, an easing fiscal drag could see a 3%-plus pace of US growth next year. That substantial improvement in the outlook for economic activity and hiring could see the Fed begin to scale back the pace of its asset purchases by early 2014, to the surprise of many in markets who may be erroneously expecting more caution from a Yellen-led Fed.

Wed, 10/09/2013 - 14:14 | 4038609 venturen
venturen's picture

The stock market will never go down again...as the FED has stated categorically....it will print money to rescue any and all banks and their minions. A long steady decent into corruption hell.

Wed, 10/09/2013 - 15:25 | 4038886 Clowns on Acid
Clowns on Acid's picture

An English speaking Venezuela.... well for a while anyway....Yellen don't speak Spanish. The next one will.

Wed, 10/09/2013 - 14:17 | 4038616 yogibear
yogibear's picture

With Janet Yellen forget about tapering. It's history. It's ever-increasing QE for the foreseeable future.

Yellen is a female Paul Krugman. 

Wed, 10/09/2013 - 14:17 | 4038617 bagehot99
bagehot99's picture

Shorter FOMC minutes: We have absolutely no fucking idea how to get out of this gigantic hole, so it seems prudent to keep digging.

This is a textbook example of why the junk-profession of central planning is a fucking joke, and those who practice it are completely full of shit. 

Wed, 10/09/2013 - 14:20 | 4038619 Walt D.
Walt D.'s picture

The Treasury will have to issue at least $1 trillion in new debt every year for the foreseeable future, taking the total debt over $20 trillion by the end of the Obama Administration.

What is more, the short term Treasury Notes issued over the last few years are scheduled to be rolled over. The Treasury will have to issue at least $5 trillion in new (and rolled over) debt in 2014.

The only entity able to absorb this is the Fed. There is no way that the Fed can stop buying Treasury Debt - they are the buyer of last resort. With a stagnant economy and welfare transfer payments increasing in bubble mode, there is no way that this is going to reverse.

Wed, 10/09/2013 - 14:43 | 4038693 bluskyes
bluskyes's picture

My guess is closer to 40 trillion

Wed, 10/09/2013 - 14:21 | 4038621 Seasmoke
Seasmoke's picture

Gold should be over $1900 just on the news and events of the past 6 months

Wed, 10/09/2013 - 14:23 | 4038625 IrishSamurai
IrishSamurai's picture

She's an original Hermans Hermit ...

"Second verse same as the first"

Wed, 10/09/2013 - 14:29 | 4038646 The Proletariat
The Proletariat's picture

Yellen, the Great Fore(Skin)caster

Wed, 10/09/2013 - 14:42 | 4038686 walküre
walküre's picture

The "tea party" faction of the GOP has everything they stand for invested in this showdown. They need to stop Obamacare or they're obsolete and 2014 won't matter to them. Obama lost on Syria and if he loses on Obamacare, he may as well resign. The showdown was long planned imo.

Who stands to benefit from a US default is the question?

War with Syria would have given Obama a much needed distraction to ram this through. The MIC et al didn't support Obama enough or at all. If the MIC did not get behind Obama for Syria, then the MIC must be frying a bigger steak with someone else and for a more beneficial purpose. They turned down the opportunity to go to war and their political arm is partial to the stalemate and fiscal showdown.

Wed, 10/09/2013 - 15:22 | 4038868 Clowns on Acid
Clowns on Acid's picture

The US Treasury does not have to default unless they wwant to.

See Moody's timely reprise (they must be expecting an IRS audit or visit from the NSA soon)

http://www.washingtonpost.com/blogs/post-politics-live/liveblog/live-upd...

 

 

Wed, 10/09/2013 - 15:42 | 4038968 walküre
walküre's picture

The UST will not default on debt and interest payments coming due but they will slash spending across the board. They may discuss payment delays post Oct. 17th and come to agreements with creditors. But they will make the payments. As far as the rest of their obligations are concerned, I'm not holding my breath.

 

Wed, 10/09/2013 - 14:47 | 4038709 bluskyes
bluskyes's picture

What happens if the regional FRB members vote a majority against the chairperson?

Wed, 10/09/2013 - 15:03 | 4038757 Quinvarius
Quinvarius's picture

Same thing that happens when an unstoppable force hits and immovable object.  Friction.

Wed, 10/09/2013 - 15:19 | 4038856 lasvegaspersona
lasvegaspersona's picture

well rehearsed 'improv' commedy....

The only reason there is more than one opinion at the fed is to create the appearence that it has options...there aren't any options...just 'print'

Wed, 10/09/2013 - 15:24 | 4038870 Diogenes
Diogenes's picture

Then somebody said "Let's not, and say we will".

Wed, 10/09/2013 - 16:16 | 4039051 polo007
polo007's picture

According to BMO Capital Markets:

Yellen Gets The Nod….Business As Usual

Bottom Line: It should be business as usual under new Chair Janet Yellen in 2014, with the Fed focused on returning the economy to full health. When the time comes to mop up the stimulus, however, we would expect her to be as equally determined to restrain inflation as Bernanke would have been.

The President’s nomination of Vice Chair Janet Yellen as head of the Fed was widely anticipated, and there was only a muted market response. She is widely expected to pass the Senate’s confirmation hearings, allowing her to step into Bernanke’s shoes on February 1. The news removes one source of uncertainty for investors buffeted by the fiscal impasse. Though sporting dovish credentials, Yellen is considered a pragmatic policy maker with an above average record in forecasting the economy. This should come in handy during these particularly uncertain times. Brian Belski, our Chief Investment Strategist, believes the Yellen appointment will be viewed as a seamless transition, one that should provide stability to equity markets.

While Yellen hasn’t spoken publicly about policy in months, it is widely believed she is still a strong supporter of the Fed’s QE program and forward guidance. The unprecedented stimulus is aimed at keeping long-term rates down until the economy strengthens and is closer to full employment, provided that inflation doesn’t rise much above the 2% target. Like Bernanke, her near-term focus is to reduce unemployment. However, this doesn’t preclude slowing asset purchases as the economy strengthens. Assuming the fiscal impasse ends in the next couple of weeks, we still lean towards a December tapering. (Bernanke will chair one more meeting after that on January 28/29.) Still, the Fed is unlikely to stop purchasing assets until next summer and probably won’t begin raising the funds rate until the second half of 2015.

We don’t believe Yellen’s dovish reputation is entirely deserved. She led the push to establish an inflation target in 2011. Her support for aggressive stimulus in recent years was likely warranted by the economy’s lackluster performance since emerging from the Great Recession, and by the equally subdued behavior of inflation. In other words, being “dovish” in the past four years has been the same as being “right”. When the economy eventually normalizes, she will likely refocus her attention on defending both sides of the Fed’s mandate of full employment and low inflation. As a supporter of open communication and transparency, Yellen will need to “lean toward the center” as a leader, to ensure that a solid majority of the other 18 policy makers support her views. This will be especially important when the time is ripe to unwind the unprecedented stimulus, as underscored by the rout in Treasuries ahead of the September meeting amid growing expectations of a mere slowing in stimulus.

Should the fiscal impasse continue and lead to prolonged economic disruptions, the new Chair may consider different tactics to offset the shock. This might include lowering the unemployment rate threshold that would trigger a potential rate hike (currently at 6.5%), or establishing an inflation threshold that would preclude tightening so long as inflation remained below it. Although expanding the size of asset purchases (from the current $85 billion monthly rate) could also be considered, this option seems to be losing favor, even among several Governors on the Federal Open Market Committee who are worried about longer-term risks to inflation and financial stability.

As one of the few policymakers to ring the alarm bells before the 2008 financial crisis, Yellen will likely take the Fed’s expanded regulatory role to heart. The last thing she wants is a credit crisis/asset bubble under her watch.

Wed, 10/09/2013 - 18:19 | 4039467 Its_the_economy...
Its_the_economy_stupid's picture

will Yellen be a consensus-seeker or dictator?

 

Ask her husband.

Wed, 10/09/2013 - 19:38 | 4039698 Constitutional ...
Constitutional Republic's picture

Dictator-dominatrix. What? You thought all dominatrix wear skimpy clothes? This one serves a foreign country first, and the USA last. Her communist and zionist credentials are well documented.

Wed, 10/09/2013 - 21:19 | 4039964 RMolineaux
RMolineaux's picture

Two comments:  Yellen's name has beem mentioned often in the main stream media during the past few years, just as Bernanke's was just prior to his appointment.  This suggests that both were being groomed for the post in a decision by power brokers.  It would be interesting to know who were the prime movers in these sponsorships.  My second comment is that the list of attendees at the FOMC meeting looks like a General Assembly meeting.  Don't these folks have other things to do instead of sitting through two days of boring meetings?   Perhaps the Fed is overstaffed.

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