August 9 · Published August 30, 2011
Statement·Presser·Minutes
BBBen S. BernankeAugust 9, 2011 FOMC Minutes
Our reading
The minutes are consistent with the statement because both documents describe a slowdown in economic growth, a deterioration in labor market conditions, a flattening of household spending, weakness in the housing sector, and the attribution of only some of the weakness to temporary factors like higher commodity prices and supply chain disruptions from the Japanese earthquake. They also both note that inflation has moderated recently, longer-term inflation expectations remain stable, and the FOMC decided to keep the federal funds rate at 0 to 1/4 percent, with forward guidance indicating exceptionally low rates at least through mid-2013. The minutes provide additional detail and discussion, but they align with the statement's key points and policy actions.
Our reading compares the minutes of the August 9 FOMC meeting with the FOMC statement issued at the end of that meeting, three weeks before the minutes were published.
Vote
- Ben S. Bernanke
- William C. Dudley
- Elizabeth A. Duke
- Charles L. Evans
- Richard W. Fisher • dissented
- Messrs. Fisher, Kocherlakota, and Plosser dissented because they would have preferred to continue to describe economic conditions as likely to warrant exceptionally low levels for the federal funds rate for an "extended period," rather than characterizing that period as "at least through mid-2013." Mr. Fisher discussed the fragility of the U.S. economy but felt that it was chiefly nonmonetary factors, such as uncertainty about fiscal and regulatory initiatives, that were restraining domestic capital expenditures, job creation, and economic growth. He was concerned both that the Committee did not have enough information to be specific on the time interval over which it expected low rates to be maintained, and that, were it to do so, the Committee risked appearing overly responsive to the recent financial market volatility.
- Narayana Kocherlakota • dissented
- Messrs. Fisher, Kocherlakota, and Plosser dissented because they would have preferred to continue to describe economic conditions as likely to warrant exceptionally low levels for the federal funds rate for an "extended period," rather than characterizing that period as "at least through mid-2013." Mr. Kocherlakota's perspective on the policy decision was shaped by his view that in November 2010, the Committee had chosen a level of accommodation that was well calibrated for the condition of the economy. Since November, inflation had risen and unemployment had fallen, and he did not believe that providing more monetary accommodation was the appropriate response to those changes in the economy.
- Charles I. Plosser • dissented
- Messrs. Fisher, Kocherlakota, and Plosser dissented because they would have preferred to continue to describe economic conditions as likely to warrant exceptionally low levels for the federal funds rate for an "extended period," rather than characterizing that period as "at least through mid-2013." Mr. Plosser felt that the reference to 2013 might well be misinterpreted as suggesting that monetary policy was no longer contingent on how the economic outlook evolved. Although financial markets had been volatile and incoming information on growth and employment had been weaker than anticipated, he believed the statement conveyed an excessively negative assessment of the economy and that it was premature to undertake, or be perceived to signal, further policy accommodation. He also judged that the policy step would do little to improve near-term growth prospects, given the ongoing structural adjustments and external challenges faced by the U.S. economy.
- Sarah Bloom Raskin
- Daniel K. Tarullo
- Janet L. Yellen
From the minutes
FOMC minutes
Voting for this action: Ben Bernanke, William C. Dudley, Elizabeth Duke, Charles L. Evans, Sarah Bloom Raskin, Daniel K. Tarullo, and Janet L. Yellen.
Voting against this action: Richard W. Fisher, Narayana Kocherlakota, and Charles I. Plosser.
Messrs. Fisher, Kocherlakota, and Plosser dissented because they would have preferred to continue to describe economic conditions as likely to warrant exceptionally low levels for the federal funds rate for an "extended period," rather than characterizing that period as "at least through mid-2013." Mr. Fisher discussed the fragility of the U.S. economy but felt that it was chiefly nonmonetary factors, such as uncertainty about fiscal and regulatory initiatives, that were restraining domestic capital expenditures, job creation, and economic growth. He was concerned both that the Committee did not have enough information to be specific on the time interval over which it expected low rates to be maintained, and that, were it to do so, the Committee risked appearing overly responsive to the recent financial market volatility. Mr. Kocherlakota's perspective on the policy decision was shaped by his view that in November 2010, the Committee had chosen a level of accommodation that was well calibrated for the condition of the economy. Since November, inflation had risen and unemployment had fallen, and he did not believe that providing more monetary accommodation was the appropriate response to those changes in the economy. Mr. Plosser felt that the reference to 2013 might well be misinterpreted as suggesting that monetary policy was no longer contingent on how the economic outlook evolved. Although financial markets had been volatile and incoming information on growth and employment had been weaker than anticipated, he believed the statement conveyed an excessively negative assessment of the economy and that it was premature to undertake, or be perceived to signal, further policy accommodation. He also judged that the policy step would do little to improve near-term growth prospects, given the ongoing structural adjustments and external challenges faced by the U.S. economy.
It was agreed that the next meeting of the Committee would be held on Tuesday�Wednesday, September 20�21, 2011. The meeting adjourned at 1:40 p.m. on August 9, 2011.
What changed from the previous meeting’s minutes
- The FOMC changed its forward guidance from "extended period" to "at least through mid-2013" for exceptionally low federal funds rate.
- The minutes noted that temporary factors accounted for only some of the economic weakness, a shift from the previous view that they were the main cause.
- The FOMC downgraded its economic outlook, expecting a slower recovery and only gradual unemployment decline, unlike the prior expectation of a pickup.
- The September 2011 meeting was extended to two days to discuss policy tools, a change from the standard one-day format.
- Three members dissented (Fisher, Kocherlakota, Plosser) over the new time-based guidance, whereas the previous vote was unanimous.
- The minutes reported that financial markets were volatile due to European fiscal issues and U.S. debt ceiling negotiations, a new concern not in the prior minutes.
Summary generated automatically from the two documents.