FOMC Excerpt: 'Accommodative' Cut Not Signal Of Policy Change>

WASHINGTON (MNI) - The following is an excerpt from the Federal Open 

Market Committee minutes of the September 25 - 26 meeting, published 

Wednesday:

     Almost all considered that it was also appropriate to revise the 

Committees postmeeting statement in order to remove the language 

stating that the stance of monetary policy remains accommodative. 

Participants discussed a number of reasons for removing the language at 

this time, noting that the Committee would not be signaling a change in 

the expected path for policy, particularly as the target range for the 

federal funds rate announced after the Committees meeting would still 

be below all of the estimates of its longer-run level submitted in the 

September SEP. In addition, waiting until the target range for the 

federal funds rate had been increased further to remove the 

characterization of the policy stance as accommodative could convey a 

false sense of precision in light of the considerable uncertainty 

surrounding all estimates of the neutral federal funds rate. 

***

     With regard to the postmeeting statement, members agreed to remove 

the sentence indicating that the stance of monetary policy remains 

accommodative. Members made various points regarding the removal of the 

sentence from the statement. These points included that the 

characterization of the stance of policy as accommodative had provided 

useful forward guidance in the early stages of the policy normalization 

process, that this characterization was no longer providing meaningful 

information in light of uncertainty surrounding the level of the neutral 

policy rate, that it was appropriate to remove the characterization of 

the stance from the Committees statement before the target range for 

the federal funds rate moved closer to the range of estimates of the 

neutral policy rate, and that the Committees earlier communications had 

helped prepare the public for this change. 

     ** MNI Washington Bureau: (202)371-2121 ** 

[TOPICS: MMUFE$,M$U$$$,MT$$$$]