MNI: FED: CAUTIOUS ON CUTS; TO START DISCUSSING QT TAPER -MINUTES

The FOMC in its January meeting saw rates likely at their peak for this tightening cycle but expressed caution on easing too quickly. In addition, many officials said it would be appropriate to begin in-depth discussions of tapering QT at the March meeting. 

• "Participants judged that the policy rate was likely at its peak for this tightening cycle."
• "Participants generally noted that they did not expect it would be appropriate to reduce the target range for the federal funds rate until they had gained greater confidence that inflation was moving sustainably toward 2%."
• Participants "remained highly attentive to inflation risks. In particular, they saw upside risks to inflation as having diminished but noted that inflation was still above the Committee's longer-run goal."
• "Most participants noted the risks of moving too quickly to ease the stance of policy." "A couple of participants, however, pointed to downside risks to the economy associated with maintaining an overly restrictive stance for too long."  
• "In light of ongoing reductions in usage of the ON RRP facility, many participants suggested that it would be appropriate to begin in-depth discussions of balance sheet issues at the Committee’s next meeting to guide an eventual decision to slow the pace of runoff.  Some participants remarked that, given the uncertainty surrounding estimates of the ample level of reserves, slowing the pace of runoff could help smooth the transition to that level of reserves or could allow the Committee to continue balance sheet runoff for longer.  In addition, a few participants noted that the process of balance sheet runoff could continue for some time even after the Committee begins to reduce the target range for the federal funds rate." 
• The staff also noted that once the ON RRP facility is either depleted or stabilized at a low level, reserves will decline at a pace comparable with the runoff of the Federal Reserve’s securities portfolio, all else equal.