The Fed left a wide berth for officials to decide in the future if and when changes should be made, according to minutes of its last policy meeting.
Ahead of the release of the minutes of the Federal Reserve’s December 15-16 monetary policy meeting on Wednesday, investors were hoping the minutes would detail what drove its decision to leave its monthly bond purchases unchanged. The news rattled investors at the time because most thought the central bank should have expanded the program to better support the economy through the coronavirus pandemic.
Investors were also hoping the minutes of that meeting would detail just what drove that decision and how the Fed is factoring the promise of a coronavirus vaccine into its plans. Of greatest interest was any insight those minutes offer into what it would take for central bankers to shift monetary policy in coming months if widespread immunization triggers a stronger economic rebound.
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Judging from the response in the markets to the release of the minutes at 19:00 GMT on Wednesday, it looks as if the Fed sufficiently responded to those issues.
Fed Already Discussing Next Phase
Even before the minutes were released, policymakers already had begun sketching out the next phase of their debate as discussions likely hinged on how successful the country is in delivering coronavirus shots to its 330 million residents.
“The faster we get that under control the more robust this recovery is going to look,” Atlanta Federal Reserve President Raphael Bostic said in an interview with Reuters this week. “We just have to ride out this time, continue to follow public health recommendations and try to minimize the spread,” while the vaccine is distributed.
Bostic said he thought it is possible that by late spring or summer, businesses that have kept off line and people that have been kept inside because of the pandemic may resume “more normal types of interaction…the middle part of the year will be quite strong.”Advertisement
Fed Minutes Highlights
The Federal Reserve was nearly unanimous in its decision last month to leave its bond-buying program unchanged, but left a wide berth for officials to decide in the future if and when changes should be made, according to minutes of the U.S. central bank’s December policy meeting.
“All participants” agreed the Fed should commit to leaving the program in place until there was “substantial further progress” towards its economic goals, and “nearly all” favored keeping the current mix of assets purchased intact rather than focusing, for example, on longer-term Treasury bonds as some analysts had advocated, said the minutes, which were released on Wednesday.
But in terms of how to judge when “substantial further progress” had been achieved, “participants commented that this judgement would be broad, qualitative, and not based on specific numerical criteria or thresholds.”
Distribution of a coronavirus vaccine, Fed officials said in the minutes, was also an “upside risk.”