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Wednesday, February 20, 2013

Minutes of January 29/30, 2013 FOMC Meeting

The minutes of the January 29/30, 2013 FOMC meeting were released today. You can find the entire transcript at this link.

This excerpt from the minutes contains their Vote and official Statement that was released that day (my take on this is at the end of this post):

At the conclusion of the discussion, the Committee
voted to authorize and direct the Federal Reserve Bank
of New York, until it was instructed otherwise, to execute
transactions in the System Account in accordance
with the following domestic policy directive:

“Consistent with its statutory mandate, the
Federal Open Market Committee seeks
monetary and financial conditions that will
foster maximum employment and price stability.
In particular, the Committee seeks
conditions in reserve markets consistent with
federal funds trading in a range from 0 to
¼ percent. The Committee directs the Desk
to undertake open market operations as necessary
to maintain such conditions. The
Desk is directed to continue purchasing
longer-term Treasury securities at a pace of
about $45 billion per month and to continue
purchasing agency mortgage-backed securities
at a pace of about $40 billion per month.
The Committee also directs the Desk to engage
in dollar roll and coupon swap transactions
as necessary to facilitate settlement of
the Federal Reserve’s agency MBS transactions.
The Committee directs the Desk to
maintain its policy of rolling over maturing
Treasury securities into new issues and its
policy of reinvesting principal payments on
all agency debt and agency mortgage-backed
securities in agency mortgage-backed securities.
The System Open Market Account
Manager and the Secretary will keep the
Committee informed of ongoing developments
regarding the System’s balance sheet
that could affect the attainment over time of
the Committee’s objectives of maximum
employment and price stability.”

The vote encompassed approval of the statement below
to be released at 2:15 p.m.:

“Information received since the Federal
Open Market Committee met in December
suggests that growth in economic activity
paused in recent months, in large part because
of weather-related disruptions and
other transitory factors. Employment has
continued to expand at a moderate pace but
the unemployment rate remains elevated.
Household spending and business fixed investment
advanced, and the housing sector
has shown further improvement. Inflation
has been running somewhat below the
Committee’s longer-run objective, apart
from temporary variations that largely reflect
fluctuations in energy prices. Longer-term
inflation expectations have remained stable.
Consistent with its statutory mandate, the
Committee seeks to foster maximum employment
and price stability. The Committee
expects that, with appropriate policy accommodation,
economic growth will proceed
at a moderate pace and the unemployment
rate will gradually decline toward levels
the Committee judges consistent with its dual
mandate. Although strains in global financial
markets have eased somewhat, the
Committee continues to see downside risks
to the economic outlook. The Committee
also anticipates that inflation over the medium
term likely will run at or below its 2 percent
To support a stronger economic recovery
and to help ensure that inflation, over time,
is at the rate most consistent with its dual
mandate, the Committee will continue purchasing
additional agency mortgage-backed
securities at a pace of $40 billion per month
and longer-term Treasury securities at a pace
of $45 billion per month. The Committee is
maintaining its existing policy of reinvesting
principal payments from its holdings of
agency debt and agency mortgage-backed securities
in agency mortgage-backed securities
and of rolling over maturing Treasury securities
at auction. Taken together, these actions
should maintain downward pressure on
longer-term interest rates, support mortgage
markets, and help to make broader financial
conditions more accommodative.
The Committee will closely monitor incoming
information on economic and financial
developments in coming months. If the outlook
for the labor market does not improve
substantially, the Committee will continue its
purchases of Treasury and agency mortgagebacked
securities, and employ its other policy
tools as appropriate, until such improvement
is achieved in a context of price stability. In
determining the size, pace, and composition
of its asset purchases, the Committee will, as
always, take appropriate account of the likely
efficacy and costs of such purchases.
To support continued progress toward maximum
employment and price stability, the
Committee expects that a highly accommodative
stance of monetary policy will remain
appropriate for a considerable time after the
asset purchase program ends and the economic
recovery strengthens. In particular,
the Committee decided to keep the target
range for the federal funds rate at 0 to
¼ percent and currently anticipates that this
exceptionally low range for the federal funds
rate will be appropriate at least as long as the
unemployment rate remains above 6½ percent,
inflation between one and two years
ahead is projected to be no more than a half
percentage point above the Committee’s
2 percent longer-run goal, and longer-term
inflation expectations continue to be well anchored.
In determining how long to maintain
a highly accommodative stance of monetary
policy, the Committee will also consider
other information, including additional
measures of labor market conditions, indicators
of inflation pressures and inflation expectations,
and readings on financial developments.
When the Committee decides to
begin to remove policy accommodation, it
will take a balanced approach consistent with
its longer-run goals of maximum employment
and inflation of 2 percent.”

Voting for this action: Ben Bernanke, William C.
Dudley, James Bullard, Elizabeth Duke, Charles L. Evans,
Jerome H. Powell, Sarah Bloom Raskin, Eric
Rosengren, Jeremy C. Stein, Daniel K. Tarullo, and
Janet L. Yellen.

Voting against this action: Esther L. George.

Notwithstanding some discussion in the meeting on the Fed's asset purchase program and Fed funds rate, I do not see a reference in the above Vote and official Statement that says the Fed is considering withdrawing or reducing their asset purchase program, or raising their rate. At the moment, it appears to still be tied to unemployment and inflation expectations. Furthermore, there was no official Economic Forecast released with the January statement...the next Forecast will be released at their next meeting on March 20th, 15 minutes before Chairman Bernanke's press conference (which will be held at 2:15 pm EST). Until I see this language changed in any future FOMC Votes/official Statements/Economic Forecasts, I can only assume that they are proceeding as outlined until, at least, their next meeting. For me to speculate otherwise, would be foolish.