September 21 · Published October 12, 2010
Statement·Presser·Minutes
BBBen S. BernankeSeptember 21, 2010 FOMC Minutes
Our reading
The minutes are consistent with the statement because both documents describe a slowing economic recovery, subdued inflation below the FOMC's mandate, and a decision to maintain the federal funds rate at 0 to 1/4 percent with an "extended period" of exceptionally low rates, while also indicating readiness to provide additional accommodation if needed.
Our reading compares the minutes of the September 21 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, emphasizing that the economy was entering the second year of moderate recovery and that, while the zero interest rate policy and "extended period" language were appropriate during the crisis and its immediate aftermath, they were no longer appropriate with the recovery under way. Mr. Hoenig also emphasized that, in his view, the current high levels of unemployment were not caused by high interest rates but by an extended period of exceptionally low rates earlier in the decade that contributed to the housing bubble and subsequent collapse and recession. He believed that holding rates artificially low would invite the development of new imbalances and undermine long-run growth. He would prefer removing the "extended period" language and thereafter moving the federal funds rate upward, consistent with his views at past meetings that it approach 1 percent, before pausing to determine what further policy actions were needed. Also, given current economic and financial conditions, Mr. Hoenig did not believe that continuing to reinvest principal payments from SOMA securities holdings was required to support the Committee's policy objectives.
- 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, Sandra Pianalto, Eric Rosengren, Daniel K. Tarullo, and Kevin Warsh.
Voting against this action: Thomas M. Hoenig.
Mr. Hoenig dissented, emphasizing that the economy was entering the second year of moderate recovery and that, while the zero interest rate policy and "extended period" language were appropriate during the crisis and its immediate aftermath, they were no longer appropriate with the recovery under way. Mr. Hoenig also emphasized that, in his view, the current high levels of unemployment were not caused by high interest rates but by an extended period of exceptionally low rates earlier in the decade that contributed to the housing bubble and subsequent collapse and recession. He believed that holding rates artificially low would invite the development of new imbalances and undermine long-run growth. He would prefer removing the "extended period" language and thereafter moving the federal funds rate upward, consistent with his views at past meetings that it approach 1 percent, before pausing to determine what further policy actions were needed. Also, given current economic and financial conditions, Mr. Hoenig did not believe that continuing to reinvest principal payments from SOMA securities holdings was required to support the Committee's policy objectives.
It was agreed that the next meeting of the Committee would be held on Tuesday-Wednesday, November 2-3, 2010. The meeting adjourned at 1:10 p.m. on September 21, 2010.
What changed from the previous meeting’s minutes
- The FOMC explicitly discussed providing additional monetary policy accommodation if growth or inflation warranted it.
- The statement added that the FOMC was "prepared to provide additional accommodation" if needed.
- The directive removed the instruction to engage in dollar roll and coupon swap transactions for agency MBS settlement.
- The statement changed "Bank lending has continued to contract" to note it was "at a reduced rate in recent months."
- The statement revised the inflation characterization from "likely to be subdued" to "currently at levels somewhat below" the mandate-consistent level.
- The statement dropped the sentence about rolling over Treasury securities as they mature.
Summary generated automatically from the two documents.