In 4 minutes (and really under 1 minute when the summary headlines hit), WSJ's Jon Hilsenrath [5] managed to parse the 25-page and considerably more diverse of opinion FOMC Minutes into a bite-sized 535 words summarizing the key sections. His conclusion, as we noted previously, despite the various members' angst, they still want to start winding down QE this year and end it next year. It would appear that his 'translation' of the minutes for the investing public offers little hope for moar QE anytime soon - even if fiscal drags are sustained. We are confident neither Hilsenrath, nor anyone else in the legacy media, ever breache[s|d] s the FOMC embargo when they receive the minutes ahead of general release for broader preparation: after all, in a time when everyone is suddenly concerned with the Fed leaking data in advance, that would just be uncivilized.
Redefining "real-time economics [6]"
[7]
Via Jon Hilsenrath of The Wall Street Journal, [5]
Federal Reserve officials struggled with a decision to press forward with their $85 billion-per-month bond-buying program at their Sept. 17-18 policy meeting, minutes of the meeting showed. Officials understood that many market participants were expecting them to pull the program back, but they worried that the economic data weren’t living up to expectations, that threats loomed in financial markets and in Washington fiscal policy and that they might unsettle matters even more if they started to wind down the program in the face of such uncertainty.
Despite their angst, many officials still want to start winding down the program this year and end it next year.
Below are key passages from the minutes:
WHAT HELD THE FED BACK AT ITS LAST MEETING? ONE FACTOR WAS RISKS ON THE HORIZON:
“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.”
FED OFFICIALS WORRIED THEY MIGHT SPARK EVEN TIGHTER FINANCIAL CONDITIONS IF THEY ACTED. A KEY PHRASE BELOW IS ‘RISK MANAGEMENT,’ I.E. THEY WANTED TO AVOID TAKING RISKS AT AN UNCERTAIN MOMENT:
“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.”
OFFICIALS WERE VERY WORRIED ABOUT HOW MARKETS WOULD TAKE A DECISION NOT TO ACT:
“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.”
MORE WORRIES ABOUT THE FED’S COMMUNICATIONS:
“In light of the mixed data recently, including inflation readings that remained below the Committee’s longer-run objective, and the concerns over near-term fiscal uncertainties, some members indicated that they preferred to await more evidence that their expectation of continuing improvement would be realized. But with financial markets appearing to expect a reduction in purchases at this meeting, concerns were raised about the effectiveness of FOMC communications if the Committee did not take that step.”
IT WAS A CLOSE CALL:
“The various considerations made the decision to maintain an unchanged pace of asset purchases at this meeting a relatively close call.”
BUT MOST OFFICIALS STILL WANT TO WIND THE PROGRAM DOWN BY NEXT YEAR, ACCORDING TO PROJECTIONS THEY SUBMITTED BEFORE THE MEETING THAT WERE PUBLISHED WITH THE MINUTES:
“Most participants judged that it would likely be appropriate to begin to reduce the pace of the Committee’s purchases of longer-term securities this year and to conclude purchases in the middle of 2014.”