So, I heard a lot of disappointment from folks who thought that the FOMC statement was complacent and indicated they weren’t doing anything. On the contrary I thought the statement was an implicit commitment to hold interest rates low and was a return to  “classic central banking” whereby we use the statement to influence interest rate expectations.

I believe this from the minutes supports my view.

Reinforcing the Committee’s forward guidance about the likely path of monetary policy was seen as a possible way to reduce interest rates and provide greater support to the economic expansion; a few participants emphasized that guidance focusing solely on the state of the economy would be preferable to guidance that named specific spans of time or calendar dates.

Those viewing a shift toward more accommodative policy as appropriate generally agreed that a strengthening of the Committee’s forward guidance regarding the federal funds rate, by being more explicit about the period over which the Committee expected the federal funds rate to remain exceptionally low, would be a measured response to the deterioration in the outlook over the intermeeting period.

Advertisements