January 27–28 · Published February 18, 2009
Statement·Presser·Minutes·Policy
BBBen S. BernankeJanuary 27–28, 2009 FOMC Minutes
Our reading
The minutes are consistent with the statement because both documents convey the same key points: the decision to keep the federal funds rate at 0 to 1/4 percent, the acknowledgment of a weakened economy with steep declines in production, housing, and employment, the expectation of a gradual recovery later in the year with significant downside risks, the view that inflation pressures will remain subdued with some risk of inflation running below levels consistent with long-term goals, and the commitment to use all available tools, including large-scale purchases of agency debt and mortgage-backed securities, to support financial markets and stimulate the economy. The minutes provide a more detailed discussion of participants' views, but they align with the statement's content and policy actions.
Our reading compares the minutes of the January 27–28 FOMC meeting with the FOMC statement issued at the end of that meeting, three weeks before the minutes were published.
Vote
- Ben S. Bernanke
- William C. Dudley
- Elizabeth A. Duke
- Rudolph M. Evans
- Donald L. Kohn
- Jeffrey M. Lacker • dissented
- Mr. Lacker dissented because he preferred to expand the monetary base by purchasing U.S. Treasury securities rather than through targeted credit programs. Mr. Lacker was fully supportive of the significant expansion of the Federal Reserve's balance sheet and the intention to maintain the size of the balance sheet at a high level. However, while he recognized that spreads were elevated and volumes low in many credit markets, he saw no evidence of market failures that made targeted credit programs, including the forthcoming TALF, necessary. Moreover, he was concerned that such programs channel credit away from other worthy borrowers, amount to fiscal policy, would exacerbate moral hazard, and might be hard to unwind. He supported, instead, maintaining the size of the balance sheet at a high level through purchases of U.S. Treasury securities. In his view, such purchases would limit distortions to private credit flows, minimize adverse incentive effects, and maintain a clear distinction between monetary and fiscal policies.
- Dennis P. Lockhart
- Kevin Warsh
- Janet L. Yellen
From the minutes
FOMC minutes
Voting for this action: Messrs. Bernanke and Dudley, Ms. Duke, Messrs. Evans, Kohn, Lockhart, and Warsh, and Ms. Yellen.
Voting against this action: Mr. Lacker.
Mr. Lacker dissented because he preferred to expand the monetary base by purchasing U.S. Treasury securities rather than through targeted credit programs. Mr. Lacker was fully supportive of the significant expansion of the Federal Reserve's balance sheet and the intention to maintain the size of the balance sheet at a high level. However, while he recognized that spreads were elevated and volumes low in many credit markets, he saw no evidence of market failures that made targeted credit programs, including the forthcoming TALF, necessary. Moreover, he was concerned that such programs channel credit away from other worthy borrowers, amount to fiscal policy, would exacerbate moral hazard, and might be hard to unwind. He supported, instead, maintaining the size of the balance sheet at a high level through purchases of U.S. Treasury securities. In his view, such purchases would limit distortions to private credit flows, minimize adverse incentive effects, and maintain a clear distinction between monetary and fiscal policies.
It was agreed that the next meeting of the Committee would be held on Tuesday, March 17, 2009. The meeting adjourned at 1:05 p.m. on January 28, 2009.
What changed from the previous meeting’s minutes
- The FOMC voted to keep the federal funds rate target range at 0 to 1/4 percent, rather than establishing it.
- Jeffrey Lacker dissented, preferring Treasury securities purchases over targeted credit programs; no dissent occurred previously.
- Participants projected a gradual recovery beginning in the third or fourth quarter of 2009, a new forecast.
- The FOMC agreed to publish quarterly longer-run projections for growth, unemployment, and inflation.
- The statement added readiness to purchase longer-term Treasury securities if conditions warrant.
- The directive retained the same $100 billion GSE debt and $500 billion MBS purchase caps.
Summary generated automatically from the two documents.