Fed members in accord on buying bonds
By ANNIE LOWREY
The New York Times | October 05,2012
WASHINGTON — Policymakers at the Federal Reserve were nearly united last month in their belief that the economic recovery needed additional help and that the central bank had the ability to provide it, according to an official account of the meeting released Thursday.
“All members but one agreed that the outlook for economic activity and inflation called for additional monetary accommodation,” read the minutes of the September meeting.
Participants were particularly concerned about the high unemployment rate.
The minutes, which summarize the discussions at the Fed’s top policymaking meeting, are routinely released three weeks after the meeting’s end.
At the last meeting, held Sept. 12-13, the Fed announced a major round of asset purchases designed to stimulate the economy and pull down the stubbornly high unemployment rate, which has ranged from 8.1 to 8.3 percent this year.
In their discussions leading up to the decision, many at the meeting noted the uncertainty surrounding the economy, given the risks posed by the continuing debt crisis in Western Europe and the major tax increases and spending cuts due to hit next year. And “a number of participants” expressed uncertainty about the effect the new Fed program might have and how it might complicate monetary policy going forward.
Thus, the Fed said it adopted a “flexible approach” that would allow the Fed “to tailor its policy response over time.”
The jobs market is “a grave concern,” Ben S. Bernanke, the Fed chairman, said a news conference following the September meeting. “While the economy appears to be on a path of moderate recovery, it isn’t growing fast enough to make significant progress reducing the unemployment rate.”
So the Fed announced it would buy large quantities of mortgage bonds until it was satisfied that the jobs market had “substantially” improved.
“We will be looking for the sort of broad-based growth in jobs and economic activity that generally signals sustained improvement in labor market conditions and declining unemployment,” Bernanke said at the time.
In the meeting, some members “were reluctant to specify explicit numerical thresholds out of concern that such thresholds would necessarily be too simple to fully capture the complexities of the economy and the policy process or could be incorrectly interpreted as triggers prompting an automatic policy response,” the minutes of the meeting said.