WASHINGTON (MNI) – According to the minutes of the Federal Open
Market Committee’s September 21 meeting released Tuesday, members
generally thought that the FOMC statement should note that the Committee
was prepared to provide additional accommodation if needed to support
the economic recovery and to return inflation, over time, to levels
consistent with its mandate. “Such an indication accorded with the
members’ sense that such accom-modation may be appropriate before long,”
the minutes. Below is an excerpt with details of the committee’s policy
action:

Committee Policy Action

In their discussion of monetary policy for the period immediately
ahead, nearly all of the Committee members agreed that it would be
appropriate to maintain the target range for the federal funds rate of 0
to 1/4 percent and to leave unchanged the level of the combined holdings
of Treasury, agency debt, and agency mortgagebacked securities in the
SOMA. Although many members considered the recent and anticipated
progress toward meeting the Committee’s mandate of maximum employment
and price stability to be unsatisfactory, members observed that incoming
data over the intermeeting period indicated that the economic recovery
was continuing, albeit slowly.

Moreover, the data had been mixed, with readings early in the
period generally weaker than anticipated but the more-recent data coming
in on the strong side of expectations. In light of the considerable
uncertainty about the current trajectory for the economy, some members
saw merit in accumulating further information before reaching a decision
about providing additional monetary stimulus. In addition, members
wanted to consider further the most effective framework for calibrating
and communicating any additional steps to provide such stimulus. Several
members noted that unless the pace of economic re-covery strengthened or
underlying inflation moved back toward a level consistent with the
Committee’s mandate, they would consider it appropriate to take action
soon.

With respect to the statement to be released following the meeting,
members agreed that it was appropriate to adjust the statement to make
it clear that underlying inflation had been running below levels that
the Com- mittee judged to be consistent with its mandate for maximum
employment and price stability, in part to help anchor inflation
expectations. Nearly all members agreed that the statement should
reiterate the expectation that economic conditions were likely to
warrant exceptionally low levels of the federal funds rate for an
extended period. One member, however, believed that continuing to
communicate that expectation in the Committee’s statement would create
conditions that could lead to macroeconomic and financial imbalances.

Members generally thought that the statement should note that the
Committee was prepared to provide additional accommodation if needed to
support the economic recovery and to return inflation, over time, to
levels consistent with its mandate. Such an indication accorded with the
members’ sense that such accommodation may be appropriate before long,
but also made clear that any decisions would depend upon future
information about the economic situation and outlook.

** Market News International Washington Bureau: 202-371-2121 **

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