The Federal Reserve is out with its minutes from the December FOMC meeting. We generally warn readers that minutes are often the third look at a Fed meeting, but this pertains to the FOMC meeting where Fed tapering of the $85 billion in monthly bond buying was announced.
Another boost to the importance of these minutes came from the notion that Friday’s unemployment reading could have more input on that bond tapering.
There was a support for the tapering at this meeting. Some Fed presidents and governors wanted even more than the $10 billion that was announced, while others wanted a cautious approach. In fact, some seem to have wanted the bond buying to end rather quickly.
Most Fed members believed that jobs would continue improving. There were discussions about guidance, including some wanting to lower the threshold of 6.5% unemployment down to 6% as far as being highly accommodative.
While there has been a healthy discussion around the pace of bond buying, there is no smoking gun here that we could see which signals whether Janet Yellen’s Fed will be much different from Ben Bernanke’s Fed.
The key takeaways we saw were as follows:
“The Committee also reiterated that it will continue its asset purchases, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. In the view of one member, a reduction in the pace of purchases was premature and, before taking such a step, the Committee should wait for more convincing evidence that economic growth was rising faster than its potential and that inflation would return to the Committee’s 2 percent objective… In their discussion of forward guidance about the target federal funds rate, a few members suggested that lowering the unemployment threshold to 6 percent could effectively convey the Committee’s intention to keep the target federal funds rate low for an extended period. However, most members wanted to make no change to the threshold…”