NEW YORK – Although economic growth was “somewhat stronger” than when they last met, labor markets remained weak, leading the Federal Open Market Committee to keep its policy the same, according to minutes of its Nov. 1-2 meeting.
Members saw a partial “reversal of temporary factors that had depressed economic growth in the first half of the year” and inflation was “likely to settle at levels at or below those consistent with the Committee’s dual mandate.”
The committee “agreed to continue the program of extending the average maturity of the Federal Reserve’s holdings of securities as announced in September” and “to maintain its existing policy of reinvesting principal payments from its holdings of agency debt and agency MBS in agency MBS and of rolling over maturing Treasury securities at auction.”
The federal funds target was left at 0 to ¼%, and the FOMC reiterated “its expectation that economic conditions—including low rates of resource utilization and a subdued outlook for inflation over the medium run—are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.”
The minutes note, “A few members expressed interest in using language specifying a period of time during which the federal funds rate was expected to remain exceptionally low, rather than a calendar date, arguing that such language might be better to indicate a constant stance of monetary policy over time. However, members generally preferred to retain the existing forward guidance, at least for now.”
Some members also stated their belief that additional policy accommodation might be warranted at some point. “However, it was noted that any such accommodation would likely be more effective if it were provided in the context of a future communications initiative, and most of these members agreed that they could support retention of the current policy stance at this meeting.”
Federal Reserve Bank of Chicago President Charles L. Evans dissented from the panel decision, the minutes note, “because he saw the high unemployment rate and the outlook for only weak economic growth as calling for additional policy accommodation at this meeting. Moreover, the longer the current situation of low resource utilization lasted, the more the economy’s longer-term growth potential could be impaired.”
“Furthermore, given current policy, his outlook was for inflation to come in below levels consistent with the Committee’s dual mandate, bolstering the case for additional monetary easing at this time. He also believed policies with more-explicit forward guidance about the economic conditions under which exceptionally low levels of the funds rate could be maintained would improve the prospects for growth and employment and, while possibly admitting somewhat higher inflation for a time, would still safeguard price stability,” the minutes report.
