WASHINGTON - Members of the Federal Open Market Committee said economic data continues to be in line with their expectations as they emphasized flexibility is needed to expand or rein in asset purchase programs and to “remain alert” to the long-term inflation outlook, minutes from the Fed’s Dec. 15-16 monetary policy meeting showed.
Fed members said economic growth strengthened in the fourth quarter and that firms are reducing payrolls at a less rapid pace. The downside risks to the economic outlook “diminished a bit further,” the minutes said.
Members agreed not to make changes to the Fed’s large-scale asset purchase programs. However, some members said resource slack was expected to diminish only slowly and observed that “it might become desirable at some point in the future to provide more policy stimulus by expanding the planned scale of the Committee’s large-scale asset purchases and continuing them beyond the first quarter, especially if the outlook for economic growth were to weaken or if mortgage market functioning were to deteriorate.”
Members noted the commercial mortgage backed securities market is “lagging behind” other markets.
But one member said economic improvements could suggest the quantity of planned asset purchases “could be scaled back” and that the Fed could begin selling assets if the economy recovers.
Members emphasized that they were prepared to modify asset purchase plans to support economic growth.
Also, members underscored the importance of keeping longer-run inflation expectations “firmly anchored to help achieve” the Fed’s dual mandate for maximum employment and price stability.
The FOMC’s first meeting of 2010 will be Jan. 26 and 27. Four Fed presidents this year have rotated onto the FOMC as voting members: Sandra Pianalto of Cleveland, Eric S. Rosengren of Boston, James Bullard of St. Louis and Thomas M. Hoenig of Kansas City.
