**MNI POLICY: FOMC Minutes: Coronavirus Worth Watching Closely>

--Top Takeaways From Minutes Of the Jan. 28-29 FOMC Meeting

By Evan Ryser 

     WASHINGTON (MNI) - Federal Reserve officials in late January said 

the new coronavirus outbreak warranted "close watching" but generally 

viewed global growth concerns and trade policy uncertainty as 

diminished, supporting their view that the current stance of monetary 

poliucy was appropriate to sustain the expansion, according to the 

minutes of the meeting released Wednesday. 

     SOMA manager, Lorie Logan, also proposed a plan to phase out 

term repo operations after April while stepping back the pace of 

Treasury bill purchases in the second quarter, the minutes said. 

     FOMC officials also discussed potential changes to the policy 

framework, in particular whether to introduce inflation target ranges, 

but did not reach any conclusions. The issue of the standing repo 

facility did not come up. 

     The following are other key points from the minutes of the Jan. 

28-29 FOMC meeting released Wednesday: 

     --FOMC participants generally agreed that current policy was 

appropriarte to sustain a strong labor market, have inflation reach the 

2% target, and growth continue at a moderate pace. 

     -- Participants generally saw the balance of risks as favorable. 

Trade uncertainties had diminished, though some risks remained and new 

risks emerged, namely the coronavirus outbreak. Several partiicpants 

noted the effect of a Phase One China deal would be "relatively 

limited," with the possbility remaining of a reescalation of tensions 

and a large portion of tariffs in place.  

     --NY Fed staff estimates suggested that after April the Treasury 

bill purchases will restore the permanent base of reserves to levels 

above those prevailing in September 2019. Although reserves are 

projected to be above USD1.5 trillion before April, a surge in the 

Treasury General Account during tax season could cause some volatility 

in the absence of repo operations.  

     --Logan discussed a plan to maintain repo operations at least 

through April and then continue the gradual reduction and consilidation 

ahead of April, with the plan to phase out term repo operations after 

April. Part of the transition plan includes gradually lifting the 

minimum bid rate on repo operations. The committee could then consider 

whether there is a role for repo operations in the implementation 

framework.  

     -- Logan said she expects in Q2 for reserve conditions to support 

slowing the pace of Treasury bill purchases with the goal of eventually 

aligning growth of Fed Treasury holdings with trend growth in 

liabilities. At that time, the  minutes show, the Committee might wish 

to consider maturity composition. 

     --Particpants continued their discussion of policy framework, 

including the interactions between monetary policy and financial 

stability and the potential use of inflation ranges. Participants 

discussed how financial stability should be incorporated in moonetary 

policy and many participants said the FOMC should not rule out adjust 

monetary policty to mitigate financial stability risks. 

     ** MNI Washington Bureau: 202-371-2121

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