Canaccord Genuity Morning Coffee on Federal Open Market Committee Minutes: What's Your Definition of Fairly Soon?
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Canaccord Genuity Morning Coffee on Federal Open Market Committee Minutes: What's your definition of fairly soon?
The minutes of the Federal Open Market Committee (FOMC), July 31-August 1, 2012, were released yesterday. If there were any doubts whether the Fed would ease, they were dispelled with the minutes. Many members judged that additional monetary accommodation would likely be warranted "fairly soon" unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery. Participants discussed a number of policy tools that the Committee might employ if it decided to provide additional monetary accommodation. One of the policy options discussed was an extension of the period over which the Committee expected to maintain its target range for the federal funds rate at 0 to 1/4 percent. Participants also exchanged views on the likely benefits and costs of a new large-scale asset purchase program. Many participants expected that such a program could provide additional support for the economic recovery both by putting downward pressure on longer-term interest rates and by contributing to easier financial conditions more broadly. Many members expressed support for extending the Committee's forward guidance, but they agreed to defer a decision on this matter until the September meeting in order to consider such an adjustment in the context of updates to participants' individual economic projections and the Committee's further consideration of its policy options. One Committee member judged that additional accommodation would likely not be effective in improving the economic outlook and viewed the potential costs associated with such action as unacceptably high. Jeffery Lacker, President of the Richmond Regional Fed Bank, dissented once again.
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The minutes of the Federal Open Market Committee (FOMC), July 31-August 1, 2012, were released yesterday. If there were any doubts whether the Fed would ease, they were dispelled with the minutes. Many members judged that additional monetary accommodation would likely be warranted "fairly soon" unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery. Participants discussed a number of policy tools that the Committee might employ if it decided to provide additional monetary accommodation. One of the policy options discussed was an extension of the period over which the Committee expected to maintain its target range for the federal funds rate at 0 to 1/4 percent. Participants also exchanged views on the likely benefits and costs of a new large-scale asset purchase program. Many participants expected that such a program could provide additional support for the economic recovery both by putting downward pressure on longer-term interest rates and by contributing to easier financial conditions more broadly. Many members expressed support for extending the Committee's forward guidance, but they agreed to defer a decision on this matter until the September meeting in order to consider such an adjustment in the context of updates to participants' individual economic projections and the Committee's further consideration of its policy options. One Committee member judged that additional accommodation would likely not be effective in improving the economic outlook and viewed the potential costs associated with such action as unacceptably high. Jeffery Lacker, President of the Richmond Regional Fed Bank, dissented once again.
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