FOMC Excerpt: May Remove Forward Guidance Entirely >

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

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

Wednesday:

     With regard to the postmeeting statement, members agreed to modify 

the phrase the Committee expects that further gradual increases to 

read the Committee judges that some further gradual increases. The use 

of the word judges in the revised phrase was intended to better convey 

the data-dependency of the Committees decisions regarding the future 

stance of policy; the reference to some further gradual increases was 

viewed as helping indicate that, based on current information, the 

Committee judged that a relatively limited amount of additional 

tightening likely would be appropriate. While members judged that the 

risks to the economic outlook were roughly balanced, they decided that 

recent developments warranted emphasizing that the Committee would 

continue to monitor global economic and financial developments and 

assess their implications for the economic outlook. 

**

     Participants emphasized that the Committees approach to setting 

the stance of policy should be importantly guided by the implications of 

incoming data for the economic outlook. They noted that their 

expectations for the path of the federal funds rate were based on their 

current assessment of the economic outlook. Monetary policy was not on a 

preset course; neither the pace nor the ultimate endpoint of future rate 

increases was known. If incoming information prompted meaningful 

reassessments of the economic outlook and attendant risks, either to the 

upside or the downside, their policy outlook would change. Various 

factors, such as the recent tightening in financial conditions and risks 

to the global outlook, on the one hand, and further indicators of 

tightness in labor markets and possible risks to financial stability 

from a prolonged period of tight resource utilization, on the other 

hand, were noted in this context. 

     Participants discussed ideas for effectively communicating to the 

public the Committees data-dependent approach, including options for 

transitioning away from forward guidance language in future postmeeting 

statements. Several participants expressed the view that it might be 

appropriate over upcoming meetings to remove forward guidance entirely 

and replace it with language emphasizing the data-dependent nature of 

policy decisions. 

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

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