FOMC Minutes Signal Tapering, More Than Recent Commentary

One key observance is that the government shutdown seems to have had a limited and temporary impact. A key issue here was that a repeated financial impasse over debt ceilings could damage business confidence and consumer confidence.

A number of Fed officials prefer equal cuts to Treasury debt buying as well as Mortgage Backed Securities. Others preferred to cut Treasury buying more than mortgage paper buying. A couple of fed officials were shown to also be in favor of lowering the target unemployment threshold down under the current 6.5% threshold target, although some warned that it could lower the Fed’s credibility.

Another development was changes to forward guidance acting to improve visibility, particularly after the 6.5% unemployment threshold was achieved. Most Fed officials believed that a reduction in interest paid on excess reserves is worth considering.

A few officials would also like a floor put in place on an inflation target. Anyhow, the markets reacted negatively to the comments because of a tapering concern. Just keep in mind that a Janet Yellen Fed will be very accommodative and easing measures will be the go-to answer for any hiccup.

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