January 26–27 · Published February 17, 2010
Statement·Presser·Minutes·Policy
BBBen S. BernankeJanuary 26–27, 2010 FOMC Minutes
Our reading
The minutes are consistent with the statement because both documents reflect the same key assessments and policy decisions: they describe strengthening economic activity, an abating labor market deterioration, subdued inflation, and the decision to maintain the federal funds rate at 0 to 1/4 percent while continuing the asset purchase programs and winding down emergency facilities, with the minutes providing more detailed discussion of participants' views that align with the statement's summary.
Our reading compares the minutes of the January 26–27 FOMC meeting with the FOMC statement issued at the end of that meeting, three weeks before the minutes were published.
Vote
- Ben S. Bernanke
- James B. Bullard
- William C. Dudley
- Elizabeth A. Duke
- Thomas M. Hoenig ↑ dissented
- Mr. Hoenig dissented because he believed it was no longer advisable to indicate that economic and financial conditions were likely to "warrant exceptionally low levels of the federal funds rate for an extended period." In recent months, economic and financial conditions improved steadily, and Mr. Hoenig was concerned that, under these improving conditions, maintaining short-term interest rates near zero for an extended period of time would lay the groundwork for future financial imbalances and risk an increase in inflation expectations. Accordingly, Mr. Hoenig believed that it would be more appropriate for the Committee to express an expectation that the federal funds rate would be low for some time--rather than exceptionally low for an extended period. Such a change in communication would provide the Committee flexibility to begin raising rates modestly. He further believed that moving to a modestly higher federal funds rate soon would lower the risks of longer-run imbalances and an increase in long-run inflation expectations, while continuing to provide needed support to the economic recovery.
- Donald L. Kohn
- Sandra Pianalto
- Eric S. Rosengren
- Daniel K. Tarullo
- Kevin Warsh
From the minutes
FOMC minutes
Voting for this action: Ben Bernanke, William C. Dudley, James Bullard, Elizabeth Duke, Donald L. Kohn, Sandra Pianalto, Eric Rosengren, Daniel K. Tarullo, and Kevin Warsh.
Voting against this action: Thomas M. Hoenig.
Mr. Hoenig dissented because he believed it was no longer advisable to indicate that economic and financial conditions were likely to "warrant exceptionally low levels of the federal funds rate for an extended period." In recent months, economic and financial conditions improved steadily, and Mr. Hoenig was concerned that, under these improving conditions, maintaining short-term interest rates near zero for an extended period of time would lay the groundwork for future financial imbalances and risk an increase in inflation expectations. Accordingly, Mr. Hoenig believed that it would be more appropriate for the Committee to express an expectation that the federal funds rate would be low for some time--rather than exceptionally low for an extended period. Such a change in communication would provide the Committee flexibility to begin raising rates modestly. He further believed that moving to a modestly higher federal funds rate soon would lower the risks of longer-run imbalances and an increase in long-run inflation expectations, while continuing to provide needed support to the economic recovery.
It was agreed that the next meeting of the Committee would be held on Tuesday, March 16, 2010. The meeting adjourned at 1:20 p.m. on January 27, 2010.
What changed from the previous meeting’s minutes
- Participants provided economic projections for 2010-2012 and longer run for first time.
- One member dissented, Thomas Hoenig, against extended period language for low rates.
- Committee added dollar roll transactions to directive for agency MBS settlement.
- Term Auction Facility scaled back to $50 billion February 8 and $25 billion March 8.
- Statement changed from "purchases" evaluation to retain reference for time being.
- Liquidity facilities closure confirmed for February 1, with swap arrangements expiring same date.
Summary generated automatically from the two documents.