WASHINGTON — With the economy continuing to grow at a slow pace, the Federal Open Market Committee's new quantitative easing program won approval despite skepticism about whether it would be as effective as previous rounds of accommodation, according to the minutes of the committee's Sept. 12-13 meeting, released Thursday.
"Some participants thought past purchases were useful because they were conducted during periods of market stress or heightened deflation risk, and were less confident of the efficacy of additional purchases under present circumstances," the minutes state. The minutes of the committee's previous meeting had revealed some trepidation among members as the group mulled a new round of purchases, which manifested in September as an agreement to purchase additional mortgage-backed securities at a pace of $40 billion per month. That is in addition to the ongoing purchases of $45 billion per month of longer-term treasuries under the maturity extension program announced in June.
"A few expressed skepticism that additional policy accommodation could help spur an economy that they saw as held back by uncertainties and a range of structural issues," according to the minutes. "In discussing the costs and risks that such a program might entail, several participants reiterated their concern that additional purchases might complicate the committee's efforts to withdraw monetary policy accommodation when it eventually became appropriate to do so, raising the risk of undesirably high inflation in the future and potentially unmooring inflation expectations."
The FOMC agreed to include expectations of the need for a "highly accommodative stance" on monetary policy through mid-2015, and noted that "sentiment in financial markets improved notably" since the previous meeting.