August 10 · Published August 31, 2010
Statement·Presser·Minutes
BBBen S. BernankeAugust 10, 2010 FOMC Minutes
Our reading
The minutes read consistently with the statement because both documents reflect the same key assessments and policy decisions: the slowdown in economic recovery, subdued inflation, the decision to maintain the federal funds rate at 0-1/4 percent, and the commitment to reinvest principal payments from agency debt and MBS in longer-term Treasury securities to support the recovery.
Our reading compares the minutes of the August 10 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 thought it was not appropriate to indicate that economic and financial conditions were "likely to warrant exceptionally low levels of the federal funds rate for an extended period" or to reinvest principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities. Mr. Hoenig felt that the "extended period" expectation could limit the Committee's flexibility to begin raising rates modestly in a timely fashion, and he believed that the recovery, which had entered its second year and was expected to continue at a moderate pace, did not require support from additional accommodation in monetary policy. Mr. Hoenig was also concerned that these accommodative policy positions could result in the buildup of future financial imbalances and increase the risks to longer-run macroeconomic and financial stability.
- 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 thought it was not appropriate to indicate that economic and financial conditions were "likely to warrant exceptionally low levels of the federal funds rate for an extended period" or to reinvest principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities. Mr. Hoenig felt that the "extended period" expectation could limit the Committee's flexibility to begin raising rates modestly in a timely fashion, and he believed that the recovery, which had entered its second year and was expected to continue at a moderate pace, did not require support from additional accommodation in monetary policy. Mr. Hoenig was also concerned that these accommodative policy positions could result in the buildup of future financial imbalances and increase the risks to longer-run macroeconomic and financial stability.
It was agreed that the next meeting of the Committee would be held on Tuesday, September 21, 2010. The meeting adjourned at 1:35 p.m. on August 10, 2010.
What changed from the previous meeting’s minutes
- The FOMC decided to reinvest principal payments from agency debt and MBS in longer-term Treasury securities.
- The directive added a target to maintain total face value of domestic securities in the SOMA at approximately $2 trillion.
- The statement changed "economic recovery is proceeding" to "pace of recovery in output and employment has slowed in recent months."
- The statement added a sentence on keeping securities holdings constant by reinvesting principal payments.
- Most participants judged downside risks to the U.S. recovery had become somewhat larger, versus a shift to downside in June.
- The risk of further disinflation was seen as increased by some, a change from June's balanced inflation risks.
Summary generated automatically from the two documents.