Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
Rather than trying to decipher the minutes, Hilsenrath had his “analysis” up within 5 minutes … ahem. So we’ll let you read what the Fed whisperer wants you to know is important via the WSJ.
Some snippets:
A number of Fed officials wanted to end the central bank’s $85 billion per month bond-buying program late this year ….
Participants also described their views regarding the appropriate path of the Federal Reserve’s balance sheet. Given their respective economic outlooks, all participants but one judged that it would be appropriate to continue purchasing both agency MBS and longer-term Treasury securities. About half of these participants indicated that it likely would be appropriate to end asset purchases late this year. Many other participants anticipated that it likely would be appropriate to continue purchases into 2014.
But there were a wide, wide range of views about how to proceed, meaning a complex set of choices for the Fed in the months ahead, a more confusion in markets …
Some participants had become more confident of sustained improvement in the outlook for the labor market and so thought that a downward adjustment in asset purchases had or would likely soon become appropriate … however, to some other participants, this approach appeared likely to limit the Committee’s flexibility in adjusting asset purchases in response to changes in economic conditions, which they viewed as a key element in the design of the purchase program. Others were concerned that stating an intention to slow the pace of asset purchases, even if the intention were conditional on the economy developing about in line with the Committee’s expectations, might be misinterpreted as signaling an end to the addition of policy accommodation or even be seen as the initial step toward exit from the Committee’s highly accommodative policy stance … many members indicated that further improvement in the outlook for the labor market would be required before it would be appropriate to slow the pace of asset purchases. Some added that they would, as well, need to see more evidence that the projected acceleration in economic activity would occur, before reducing the pace of asset purchases. For one member, such a decision would also depend importantly on evidence that inflation was moving back toward the Committee’s 2 percent objective; that member urged the Committee to modify its postmeeting statement to say explicitly that the Committee will act to move inflation back toward its goal. A couple of other members also worried that the downside risks to inflation had increased, with one of them suggesting that the statement more explicitly reflect this increased risk. However, several members judged that a reduction in asset purchases would likely soon be warranted, in light of the cumulative decline in unemployment since the September meeting and ongoing increases in private payrolls …
Is the Fed worried about rising long-term interest rates? Just a little:
In their discussion of financial market developments over the intermeeting period, participants weighed the extent to which the rise in market interest rates and increase in volatility reflected a reassessment of market participants’ expectations for monetary policy and the extent to which it reflected growing confidence about the economic outlook. It was noted that corporate credit spreads had not widened substantially and that the stock market had posted further gains, suggesting that the higher rates reflected, at least in part, increasing confidence that moderate economic growth would be sustained. Several participants worried that higher mortgage rates and bond yields could slow the recovery in the housing market and restrain business expansion. However, some others commented that any adverse effects of the increase in rates on financial conditions more broadly appeared to be limited.
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