Right from the F_E_D itself apparently...From Bloomberg...
| FOMC Minutes | |
Highlights
The Fed posted the latest FOMC minutes early due to a premature release. |
Most participants saw QE as having a meaningful effect on the economy. Few saw QE risks outweighing the benefits. Regarding the economy, the minutes reflected the view expressed at the chairman's press conference that the economy, including the labor market, was improving. This, of course, was prior to the latest employment situation report. "The information reviewed at the March 19-20 meeting suggested that economic activity was expanding at a moderate rate in the first quarter of this year after the slowdown late last year. Private-sector employment increased at a fairly solid pace, on balance, and the unemployment rate, though still elevated, was slightly lower in February than in the fourth quarter of last year. Consumer price inflation, excluding some temporary fluctuations in energy prices, was subdued, while measures of longer-run inflation expectations remained stable." Fed staff economists gave a moderately favorable evaluation of U.S. financial markets, although Europe remained a concern. "Generally favorable U.S. economic data releases, along with communications from Federal Reserve policymakers regarding the outlook for the economy and monetary policy, appeared to contribute to improved sentiment in domestic financial markets over the intermeeting period despite some renewed concerns about economic and financial conditions in Europe." As noted in the FOMC quarterly forecasts released March 20, FOMC participants left forecasts for economic growth little change, calling for moderate growth. "Meeting participants generally indicated that they viewed the economic data received during the intermeeting period as somewhat more positive than had been expected, but that fiscal policy appeared to have become more restrictive, leaving the outlook for the economy little changed on balance since the January meeting. Participants judged that the economy had returned to moderate growth following a pause late last year, and a few noted that the downside risks may have diminished. " As heard in recent FedSpeak, there was quite a bit of internal debate about the benefits and costs of quantitative easing. One key point of the debate was whether the Fed should purchase only Treasuries and not mortgage-backed securities. "Pointing to academic and Federal Reserve staff research, most participants saw asset purchases as having a meaningful effect in easing financial conditions and so supporting economic growth. Some expressed the view that these effects had likely been stronger during the Federal Reserve's initial large-scale asset purchases because that program also helped support market functioning during the financial crisis. Other participants, however, saw little evidence that the efficacy of asset purchases had declined over time, and a couple of these suggested that the effectiveness of purchases might even have increased more recently, as the easing of credit constraints allowed more borrowers to take advantage of lower interest rates." "A few participants felt that MBS purchases provided more support to the economy than purchases of longer-term Treasury securities because they stimulated the housing sector directly; however, a few preferred to focus any purchases in the Treasury market to avoid allocating credit to a specific sector of the economy." "Participants generally agreed that asset purchases also have potential costs and risks. In particular, participants pointed to possible risks to the stability of the financial system, the functioning of particular financial markets, the smooth withdrawal of monetary accommodation when it eventually becomes appropriate, and the Federal Reserve's net income. Their views on the practical importance of these risks varied, as did their prescriptions for mitigating them." There was not much new news in the minutes, given that the forecasts were already released and that Chairman Bernanke explained much in the press conference after the release of the statement. One interesting item to come out of the minutes is that more guidance is likely to come-on the Fed's balance sheet effects on the Treasury's budget. The Fed transfers each year's profits from operations to the Treasury and the remittances have been substantial at times. During unwinding of the Fed's balance sheet, the Fed may actually lose money (buying Treasuries at high prices and selling lower). So, the Fed will eventually provide guidance on this path and essentially say, don't worry. "One consequence of asset purchases has been the increase in the Federal Reserve's net income and its remittances to the Treasury, but those values were projected to decline, perhaps even to zero for a time, as the Committee eventually withdraws policy accommodation. Some participants were concerned that a substantial decline in remittances might lead to an adverse public reaction or potentially undermine Federal Reserve credibility or effectiveness. The possibility of such outcomes was seen as necessitating clear communications about the outlook for Federal Reserve net income." The bottom line is that the doves still dominated the FOMC and QE continues. The latest and sluggish jobs report means that the hawks may tone down their rhetoric for an early tapering of QE. | |
| Definition The Federal Open Market Committee issues minutes of its meetings with a lag. The minutes of the previous meeting are reported three weeks after the meeting. |
No comments:
Post a Comment