The Minutes of the Federal Open Market Committee from October 23–24, 2012 have been released. s we saw from Vice Chair Yellen yesterday, it sure seems as though some changes are going to be made on guidance and efforts ahead. This includes the possibility of policy triggers and members were largely in favor of using thresholds. There was also a mention that quantitative triggers would help guidance, while practical issues would likely delay changes in communication.

On the economy, growth was cited as being at a moderate pace and the expected growth was considered to be moderate. The easing efforts are believed to have helped the recovery but the euro crisis and the coming fiscal cliff are a large concern. Another issue mentioned is that a noticeable slowdown was seen in business investment but most Fed officials see inflation at or under the 2% target. The housing recovery is considered to be underway even though some officials noted tighter lending standards in their regions.

Real GDP growth in the near term was revised up relative to the previous projection. Some participants expressed concern about weaker manufacturing output and new orders in recent months, particularly in capital goods industries.

The Committee judged that continuing both the purchases of MBS at a pace of $40 billion per month and the existing program to extend the average maturity of its Treasury securities holdings remained appropriate. The Committee also agreed to maintain its policy of reinvesting principal payments from its holdings of agency debt and agency MBS into agency MBS.

Jeffrey Lacker remained the sole dissenting vote. On this the minutes said, “Mr. Lacker dissented for the same reasons he had cited at the September FOMC meeting, including his view of the likely ineffectiveness of asset purchases and their potential inflationary effects, as well as the inappropriateness of credit allocation inherent in purchasing MBS. He also continued to disagree with the description of the time period over which a highly accommodative stance of monetary policy would remain appropriate and exceptionally low levels for the federal funds rate were likely to be warranted.”

FULL FOMC MINUTES

JON C. OGG

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