December 14 · Published January 4, 2011
Statement·Presser·Minutes
BBBen S. BernankeDecember 14, 2010 FOMC Minutes
Our reading
The minutes are consistent with the statement because both documents reflect the FOMC's decision to maintain its accommodative monetary policy stance—specifically, continuing the $600 billion Treasury purchase program and keeping the federal funds rate at 0-1/4 percent—while acknowledging that, despite a modest improvement in the economic outlook, progress toward maximum employment and price stability remains disappointingly slow, with underlying inflation trending downward and unemployment elevated.
Our reading compares the minutes of the December 14 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 judged that economic conditions were improving, and that the current highly accommodative stance of monetary policy was inconsistent with the Committee's long-run mandate. Mr. Hoenig noted that the economic recovery was shifting from transitory to more sustainable sources of growth and was picking up momentum. In his assessment, maintaining highly accommodative monetary policy in the current economic environment would increase the risk of future imbalances and, over time, cause an increase in longer-term inflation expectations. Mr. Hoenig also was concerned that the eventual orderly reduction of policy accommodation would become more difficult the longer the first step in that process was delayed. In Mr. Hoenig's view, the Committee should begin preparing markets for a reduction in policy accommodation. Accordingly, he thought the press statement should indicate that sufficient monetary stimulus was in place to support the recovery.
- Sandra Pianalto
- Sarah Bloom Raskin
- Eric S. Rosengren
- Daniel K. Tarullo
- Kevin Warsh
- Janet L. Yellen
From the minutes
FOMC minutes
Voting for this action: Ben Bernanke, William C. Dudley, James Bullard, Elizabeth Duke, Sandra Pianalto, Sarah Bloom Raskin, Eric Rosengren, Daniel K. Tarullo, Kevin Warsh, and Janet L. Yellen.
Voting against this action: Thomas M. Hoenig.
Mr. Hoenig dissented because he judged that economic conditions were improving, and that the current highly accommodative stance of monetary policy was inconsistent with the Committee's long-run mandate. Mr. Hoenig noted that the economic recovery was shifting from transitory to more sustainable sources of growth and was picking up momentum. In his assessment, maintaining highly accommodative monetary policy in the current economic environment would increase the risk of future imbalances and, over time, cause an increase in longer-term inflation expectations. Mr. Hoenig also was concerned that the eventual orderly reduction of policy accommodation would become more difficult the longer the first step in that process was delayed. In Mr. Hoenig's view, the Committee should begin preparing markets for a reduction in policy accommodation. Accordingly, he thought the press statement should indicate that sufficient monetary stimulus was in place to support the recovery.
It was agreed that the next meeting of the Committee would be held on Tuesday-Wednesday, January 25-26, 2011. The meeting adjourned at 12:55 p.m. on December 14, 2010.
What changed from the previous meeting’s minutes
- Participants saw the near-term outlook as improved, expecting growth to pick up, versus slow growth previously.
- The new fiscal package was expected to support recovery, a factor not mentioned in November.
- Underlying inflation continued trending downward, but several saw deflation risk as having receded.
- Longer-term interest rates rose substantially over the intermeeting period, unlike the decline in November.
- The FOMC decided to continue the $600 billion Treasury purchase program without adjustment, citing insufficient change in outlook.
- Hoenig's dissent shifted from arguing purchases' risks outweighed benefits to citing improving conditions and future imbalance risks.
Summary generated automatically from the two documents.