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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 
growth. 
     --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 
trading partners. 
     --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 
rate. 
     ** MNI Washington Bureau: 202-371-2121 ** 
 
[TOPICS: MMUFE$,M$U$$$,MAUDR$]