FOMC Excerpt: Financial Conditions Not Yet Drag On Activity >

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

Market Committee minutes of the December 18 - 19 meeting, published 

Wednesday:

     After taking into account incoming economic data, information from 

business contacts, and the tightening of financial conditions, 

participants generally revised down their individual assessments of the 

appropriate path for monetary policy and indicated either no material 

change or only a modest downward revision in their assessment of the 

economic outlook. Economic growth was expected to remain above trend in 

2019 and then slow to a pace closer to trend over the medium term. 

Participants who downgraded their assessment of the economic outlook 

pointed to a variety of factors underlying their assessment, including 

recent financial market developments, some softening in the foreign 

economic growth outlook, or a more pessimistic outlook for 

housing-sector activity.

**

     In their discussion of financial developments, participants agreed 

that financial markets had been volatile and financial conditions had 

tightened over the intermeeting period, as equity prices declined, 

corporate credit spreads widened, and the Treasury yield curve continued 

to flatten. Some participants commented that these developments may 

reflect an increased focus among market participants on tail risks such 

as a sharp escalation of trade tensions or could be a signal of a 

significant slowdown in the pace of economic growth in the future. A 

couple of participants noted that the tightening in financial conditions 

so far did not appear to be restraining real activity, although a more 

persistent tightening would undoubtedly weigh on business and household 

spending. Participants agreed to continue to monitor financial market 

developments and assess the implications of these developments for the 

economic outlook. 

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

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