NEW YORK – The Federal Open Market Committee discussed ways to better communicate its policy decisions, deciding to wait to see if the changes already made help, according to the minutes of its latest meeting, which were released Tuesday.
“Participants discussed a range of additional steps that the Committee might take to help the public better understand the linkages between the evolving economic outlook and the Federal Reserve’s monetary policy decisions, and thus the conditionality in the Committee’s forward guidance,” according to the minutes of the March 13 meeting. “The purpose of the discussion was to explore potentially promising approaches for further enhancing FOMC communications; no decisions on this topic were planned for this meeting and none were taken.”
Among the enhancements discussed were actions that might be taken in response to changes in the outlook and whether changes in the Summary of Economic Projections could help convey messages. Several members suggested at some point discussing “alternative economic scenarios and the monetary policy responses that might be seen as appropriate under each one, in order to clarify the Committee’s likely behavior in different contingencies.”
But, some participants wanted “additional experience with the changes implemented to date” before looking at other “enhancements.”
Turning to the economy, the panel felt that moderate expansion continued and although the outlook was “a bit stronger overall,” but “broadly similar” to conditions when the FOMC last met in January. They expect growth will continue on this path, with the jobless rate slipping gradually.
The group still regards “strains in global financial markets,” although acknowledging the stress has eased since January, as posing “significant downside risks.” Inflation has remained “subdued,” with longer-term expectations “stable,” despite the recent spike in oil and gas prices, which panelist see as temporary.
As a result, “members agreed that it would be appropriate to maintain the existing highly accommodative stance of monetary policy. In particular, they agreed to keep the target range for the federal funds rate at 0 to ¼ percent, to continue the program of extending the average maturity of the Federal Reserve’s holdings of securities as announced in September, and to retain the existing policies regarding the reinvestment of principal payments from Federal Reserve holdings of securities,” according to the minutes.
The panel made only minor changes to its post-meeting statement, “to reflect the incoming economic data, the improvement in financial conditions, and the modest changes to the economic outlook.”
The FOMC continues to plan “to maintain a highly accommodative stance for monetary policy and currently anticipates 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 late 2014.”
The panel noted this was “conditional on economic developments, and members concurred that the date given in the statement would be subject to revision in response to significant changes in the economic outlook.”
One member, the minutes said, said leaving “the current degree of policy accommodation much beyond this year would likely be inappropriate,” and believes tightening would be need before the end of 2014, or inflation will rise. While it did not identify the member, the minutes stated that Richmond Federal Reserve Bank President Jeffrey Lacker dissented from the decision, voicing similar concerns.
On the other side, the minutes say “A couple of members indicated that the initiation of additional stimulus could become necessary if the economy lost momentum or if inflation seemed likely to remain below its mandate consistent rate of 2 percent over the medium run.”
The staff also increased near-term predictions of GDP “a little,” and predicted GDP will rise “gradually in 2012 and 2013.” Projections for inflation were also ramped up a bit, although “the staff continued to project that inflation would be subdued in 2012 and 2013.”