FOMC meeting minutes from September 2020

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  • financial conditions eased over the intermeeting period. Equity prices rose and the broad dollar continued to depreciate from its crisis-driven peak in March. Yields on Treasury inflation-protected securities fell, while longer-dated nominal Treasury yields increased modestly.
  • Market participants attributed these developments to a stronger economic outlook, better news on the COVID19 trajectory, better-than-feared corporate earnings reports, and accommodative policy.
  • While the economic outlook had brightened, market participants continued to see significant risks ahead. Some noted concerns about elevated asset valuations in certain sectors. Many also cited geopolitical events as heightening uncertainty.
  • Conditions in short-term dollar funding markets remained stable over the period.
  • Markets for Treasury securities and agency mortgagebacked securities (MBS) continued to function smoothly, with bid-ask spreads and a range of other indicators remaining near pre-pandemic levels.
  • U.S. real GDP was rebounding at a rapid rate in the third quarter
  • Labor market conditions continued to improve markedly in July and August, but employment was still below its level at the beginning of the year.
  • Consumer price inflation-as measured by the 12-month percentage change in the price index for personal consumption expenditures (PCE) through July remained well below the rates that prevailed early in the year
  • Total nonfarm payroll employment expanded strongly in July and August, although payrolls had retraced only about half of the jobs lost at the onset of the pandemic
  • Total PCE price inflation was 1.0 percent over the 12 months ending in July, reflecting both weak aggregate demand and a considerable drop in consumer energy prices early this year.
  • Core PCE price inflation, which excludes changes in consumer food and energy prices, was 1.3 percent over the same 12-month period.
  • Housing-sector activity continued to expand, likely supported by the effects of low interest rates.
  • Indicators of business fixed investment suggested that this sector was beginning to recover on balance.
  • Industrial production expanded further in July and August, although at a less rapid pace than over the preceding two months.
  • Total real government purchases appeared to be increasing modestly, on balance, in the third quarter.
  • After declining sharply earlier this year, exports and imports of goods and services increased strongly in June and July.
  • The expected path for the federal funds rate over the next few years, as implied by a straight read of overnight index swap quotes, was little changed, on net, since the July FOMC meeting and remained close to the effective lower bound (ELB) through the first half of 2024
  • Broad stock price indexes rose, on net, during the intermeeting period, consistent with generally better-than-expected news on both the economy and second-quarter corporate earnings.
  • In the U.S. economic projection prepared by the staff for the September FOMC meeting, the rate of real GDP growth and the pace of declines in the unemployment rate were faster over the second half of this year than in the July forecast, primarily reflecting recent better-thanexpected data.
  • The inflation forecast for the rest of the year was revised up slightly, as some recent consumer goods prices were stronger than expected. Nevertheless, inflation was still projected to be subdued this year, reflecting substantial slack in resource utilization and the sizable declines in consumer energy prices earlier this year
  • participants were concerned about possible buildup of financial balances
  • a couple participants indicated that highly accommodative financial market conditions could lead to excessive risk-taking
  • most participants raise the concern that fiscal support so far my not divide sufficient relief
  • a couple participants saw an upside risk of bigger than expected fiscal stimulus, though later than had been expected