More discussion of normalizing policy was needed and no decisions were made at the Federal Open Market Committee meeting of April 26-27, according to minutes of the meeting released Wednesday by the Fed.

Staff defined the difference between normalizing the stance of the policy  (withdrawing accommodation) and the conduct (draining reserves). Then they determined that first, the panel needed to decide “the extent to which the committee would want to tighten policy, at the appropriate time, by increasing short-term interest rates, by decreasing its holdings of longer-term securities, or both.”

Next, policymakers must determine whether they will vary the pace of any asset sales.

“If it chose to make the pace of sales quite responsive to conditions, the FOMC would be able to actively use two policy instruments — asset sales and the federal funds rate target — to pursue its economic objectives, which could increase the scope and flexibility for adjusting financial conditions,” the Fed staff said.

“In contrast, sales at a pace that varied less with changes in economic and financial conditions and was pre-announced and largely predetermined would leave the federal funds rate target as the committee’s primary active-policy instrument, which could result in policy that is more straightforward for the committee to calibrate and to communicate.”

Also available are reverse repurchase agreements and term deposits, which can “tighten the correspondence between any changes in the interest rate the Federal Reserve pays on excess reserves and the changes in the federal funds rate,” according to the minutes.

The FOMC decided any strategy would need to take into account “the committee’s monetary policy objectives for maximum employment and price stability.”

Also, while the panel was prepared to discuss the appropriate strategy for normalizing the stance of monetary policy, it doesn’t mean “the move toward such normalization would necessarily begin soon.”

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