August 11–12, 2009 FOMC Minutes

Our reading

The minutes are consistent with the statement because both documents convey the same key assessments and policy decisions: economic activity is leveling out, financial markets have improved, household spending is stabilizing but constrained, businesses are reducing inventories, inflation is expected to remain subdued due to resource slack, the federal funds rate will stay at 0 to 1/4 percent for an extended period, and the Fed will gradually slow its Treasury purchases to complete them by the end of October while maintaining its other asset purchase programs.

FOMC minutes

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve is in the process of buying $300 billion of Treasury securities. To promote a smooth transition in markets as these purchases of Treasury securities are completed, the Committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October. The Committee will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets. The Federal Reserve is monitoring the size and composition of its balance sheet and will make adjustments to its credit and liquidity programs as warranted."

Voting for this action: Messrs. Bernanke and Dudley, Ms. Duke, Messrs. Evans, Kohn, Lacker, Lockhart, Tarullo, and Warsh, and Ms. Yellen.

Voting against this action: None.

It was agreed that the next meeting of the Committee would be held on Tuesday-Wednesday, September 22-23, 2009. The meeting adjourned at 11:40 a.m. on August 12, 2009.