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--Top Takeaways From Minutes Of the Sept 25-26 FOMC Meeting
By Jean Yung
WASHINGTON (MNI) - The following are the key points from the
minutes of the Sept. 25-26 FOMC meeting released Wednesday:
--Many FOMC members want to temporarily push rates higher than
neutral to minimize the risk of inflation running higher than 2% and
financial stability risks. "A number judged that it would be necessary
to temporarily raise the federal funds rate above their assessments of
its longer-run level" in order to reduce the risk of "a sustained
overshooting" of the inflation objective or the risk of "signficant
financial imbalances," the minutes said. There are also a few officials
who project modestly restrictive policy "for a time" and a couple others
who said they would not favor a restrictive stance unless the economy is
clearly overheating and inflation rising.
--The FOMC judged it appropriate to remove the reference to
'accommodative' monetary policy from its policy statement before the fed
funds rate moved closer to the range of estimates of the neutral rate so
that it would not be "signaling a change in the expected path for
policy." Had they waited to remove the phrase, it "could convey a false
sense of precision in light of the considerable uncertainty surrounding
all estimates of the neutral federal funds rate."
--Policymakers generally anticipated that "further gradual
increases" would be necessary and expected that inflation was on a
trajectory to achieve the 2% target on a sustained basis.
--Officials reiterated that estimates of the neutral rate would be
"only one among many factors" they will consider in determining policy.
--Officials saw risks as roughly balanced. Downside risks include:
uncertainty over trade policy, a stronger dollar stemming from
divergence between domestic and foreign economic growth prospects and
monetary policy settings, and financial stress in a few EMEs. Upside
risks include: high consumer confidence, accommodative financial
conditions, and greater-than-expected effects of fiscal stimulus on
--A few officials said economic growth was stronger than they had
expected while the rest said the data was as expected. A couple
officials said recent strong GDP growth may be due in part to an
increase in the economy's productive capacity. The tax cut likely
bolstered investment spending. On the other hand, steel and aluminum
tariffs were reducing new investment in the energy sector while some
firms said they were trying to diversify the geographic origins of their
--No discussion about making another technical adjustment to the
IOER rate relative to the upper end of the target range, but the SOMA
manager reported that the spread between the IOER rate and the effective
fed funds rate was "relatively tight" at 3 bps and seemed likely to
narrow to 2 bps in the near future. However there was no sign that a
scarcity of reserves was driving the upward pressure on the fed funds
** MNI Washington Bureau: 202-371-2121 **