FOMC Minutes: QE and Low Interest Rates to Continue!

The FOMC is out with its highly anticipated minutes of its last meeting. While there is some clarification and some expansion of their comments along with Ben Bernanke anticipation, we would remind readers that this data is now three weeks old from the June 18 to 19 FOMC meeting. Fed officials were generally in support of the “considerable period” of low interest rates and almost all FOMC officials were in support of an accommodative policy. The FOMC also wanted Ben Bernanke to drive home the notion that a rise in interest rates would likely be well into the future.

Most FOMC members also supported using the press conference to describe the Fed’s bond buying outlook as well. It said,

“…the Committee again discussed its strategy for the eventual normalization of the stance of monetary policy and the size and composition of the Federal Reserve’s balance sheet…”

We would note that there really is not any new information here that should spook investors, and we would further note that the data should have been anticipated by this point due to it being three weeks old. The FULL FOMC MINUTES are here.

Below is the discussion of the guidelines for policy normalization:

In light of the changes in the System Open Market Account (SOMA) portfolio over the past two years, the Committee again discussed its strategy for the eventual normalization of the stance of monetary policy and the size and composition of the Federal Reserve’s balance sheet that was released in the minutes of the Committee’s June 2011 meeting. Although most participants saw this review as prudent longer-range planning, some felt that the discussion was premature. Meeting participants, in general, continued to view the broad principles set out in 2011 as still applicable. Nonetheless, they agreed that many of the details of the eventual normalization process would likely differ from those specified two years ago, that the appropriate details would depend in part on economic and financial developments between now and the time when it becomes appropriate to begin normalizing monetary policy, and that the Committee would need to provide additional information about its intentions as that time approaches. Participants continued to think that the Federal Reserve should, in the long run, hold predominantly Treasury securities. Most, however, now anticipated that the Committee would not sell agency mortgage-backed securities (MBS) as part of the normalization process, although some indicated that limited sales might be warranted in the longer run to reduce or eliminate residual holdings. A couple of participants stated that they preferred that the Committee make no decision about sales of MBS until closer to the start of the normalization process. Participants agreed that the Committee’s focus continued to be on providing appropriate monetary accommodation to promote a stronger recovery in the context of price stability and so judged that additional discussion regarding policy normalization should be deferred.