The Federal Open Market Committee discussed buying agency mortgage-backed securities backed by adjustable-rate mortgages, and while some members "thought it would be useful," others saw little potential benefit, and the FOMC made no decision on purchasing ARM MBS at its August meeting, according to minutes of the meeting released yesterday.

Also discussed was progressively reducing the pace of the Fed's buying Treasury securities, agency debt, and agency MBS prior to the end of the asset purchase programs in an effort to "smooth" the transition in markets, but again the panel took no action.

"The staff presented an update on the continuing development of several tools that could help support a smooth withdrawal of policy accommodation at the appropriate time," according to the minutes.

"These measures include executing reverse repurchase agreements on a large scale, potentially with counterparties other than the primary dealers; implementing a term deposit facility that would be available to depository institutions in order to reduce the supply of excess reserves; and taking steps to tighten the link between the interest rate paid on reserve balances held at the Federal Reserve Banks and the federal funds rate," the minutes said.

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