November 15 · Published December 22, 1994
Statement·Presser·Minutes
AGAlan GreenspanNovember 15, 1994 FOMC Minutes
Our reading
The minutes read much more dovish than the statement because they focus on the operational details of foreign exchange swap arrangements and a dissenting opinion about intervention, rather than reiterating the statement's hawkish rationale of tightening policy to combat inflation and strong economic activity.
Our reading compares the minutes of the November 15 FOMC meeting with the FOMC statement issued at the end of that meeting, three weeks before the minutes were published.
Vote
- Alan S. Blinder
- J. Alfred Broaddus, Jr.
- Robert P. Forrestal
- Alan Greenspan
- Jerry L. Jordan
- Edward W. Kelley, Jr.
- John P. LaWare
- Lawrence B. Lindsey
- William J. McDonough
- Robert T. Parry
- Susan M. Phillips
- Janet L. Yellen
From the minutes
FOMC minutes
Mr. Broaddus dissented because he believed that the Federal Reserve's participation in foreign exchange market intervention compromises its ability to conduct monetary policy effectively. Because sterilized intervention cannot have sustained effects in the absence of conforming monetary policy actions, Federal Reserve participation in foreign exchange operations risks one of two undesirable outcomes. First, the independence of monetary policy is jeopardized if the System adjusts its policy actions to support short-term foreign exchange objectives set by the Treasury. Alternatively, the credibility of monetary policy is damaged if the System does not follow interventions with compatible policy actions, the interventions consequently fail to achieve their objectives, and the System is associated in the mind of the public with the failed operations. In these circumstances, he did not view renewal of the existing swap lines as desirable because they are used primarily to facilitate market intervention.
It was agreed that the next meeting of the Committee would be held on Tuesday, December 20, 1994.
The meeting adjourned at 2:05 p.m.
Donald L. Kohn Secretary
What changed from the previous meeting’s minutes
- The FOMC shifted from maintaining steady policy to considering immediate tightening due to rising inflation risks.
- The directive changed from asymmetric toward restraint to a decision to increase reserve restraint.
- The discount rate was raised from 3.5 to 4 percent in August, with full pass-through to market rates.
- The FOMC approved renewal of foreign currency swap lines with multiple central banks, including new arrangements.
- Mr. Broaddus dissented on the swap line renewal, citing risks to monetary policy independence and credibility.
- The next meeting was moved from November 15 to December 20, 1994.
Summary generated automatically from the two documents.