WASHINGTON (MNI) – The following is an excerpt from the text of the
minutes of the Federal Open Market Committee’s April 26-27 meeting
published Wednesday. The section below is the discussion on the
Committee Policy Action where a few members viewed increased inflation
risks as suggesting that economic conditions could evolve in a way that
would warrant the Committee to taking steps toward less-accommodative
policy action sooner than currently anticipated:

Committee members agreed that no changes to the Committee’s asset
purchase program or to its target range for the federal funds rate were
warranted at this meeting. The information received over the
intermeeting period indicated that the economic recovery was proceeding
at a moderate pace, albeit somewhat slower than had been anticipated
earlier in the year. Overall conditions in the labor market were
gradually improving, and the unemployment rate continued to decline,
although it remained elevated relative to levels that the Committee
judged to be consistent, over the longer run, with its statutory mandate
of maximum employment and price stability. Significant increases in
energy and other commodity prices had boosted overall inflation, but
members expected this increase to be transitory and to unwind when
commodity price increases abated. Notwithstanding recent modest
increases, indicators of medium-term inflation remained subdued and
somewhat below the levels seen as consistent with the dual mandate as
indicated by the Committee’s longerrun inflation projections. Near-term
inflation expectations had increased with energy prices and overall
inflation. Recent movements in measures of longer-term inflation
expectations were discussed. While some measures of longer-term
inflation expectations had risen, others were little changed or down, on
net, since March, and members agreed that longer-term inflation
expectations had remained stable. Given this economic outlook, the
Committee agreed to continue to expand its holdings of longer-term
Treasury securities as announced in November in order to promote a
stronger pace of economic recovery and to help ensure that inflation,
over time, is at levels consistent with the Committee’s mandate.
Specifically, the Committee maintained its existing policy of
reinvesting principal payments from its securities holdings and affirmed
that it will complete purchases of $600 billion of longer-term Treasury
securities by the end of the current quarter. A few members remained
uncertain about the benefits of the asset purchase program but, with the
program nearly completed, judged that making changes to the program at
this time was not appropriate. The Committee continued to anticipate
that economic conditions, including low rates of resource utilization,
subdued inflation trends, and stable inflation expectations, were likely
to warrant exceptionally low levels for the federal funds rate for an
extended period. That said, a few members viewed the increase in
inflation risks as suggesting that economic conditions might well evolve
in a way that would warrant the Committee taking steps toward
less-accommodative policy sooner than currently anticipated.

Members agreed that the Committee will regularly review the size
and composition of its securities holdings in light of incoming
information and that they are prepared to adjust those holdings as
needed to best foster maximum employment and price stability. Some
members pointed out that there would need to be a significant change in
the economic outlook, or the risks to that outlook, before another
program of asset purchases would be warranted; in their view, absent
such changes, the benefits of additional purchases would be unlikely to
outweigh the costs.

In the statement to be released following the meeting, members
decided to indicate that the economic recovery was proceeding at a
moderate pace and that overall conditions in the labor market were
gradually improving. The Committee also decided to summarize its current
thinking about inflation pressures and to emphasize that it will closely
monitor the evolution of inflation and inflation expectations. Members
anticipated that the Chairman, who would deliver his first postmeeting
press briefing later that afternoon, would provide additional context
for the Committee’s policy decisions.

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

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