OPINION
Market Rating Before FOMC MeetingJan 31
FOMC Minutes and the Rate Hike
The minutes of the meeting of the Federal Open Market Committee (FOMC) on January 25-26 were published yesterday at 21:00 (GMT+2).
On January 26, the Committee had decided to keep the target range for the federal funds rate at 0 to 1/4 percent and to increase its holdings of Treasury securities by at least $20 billion per month and of agency mortgage‑backed securities by at least $10 billion per month as a result of the meeting.
In the minutes, Committee members noted that inflation has started to spread beyond the sectors affected by the coronavirus and to the wider economy, and they are of the opinion that inflation risks are high and a faster rate hike path may be required if these risks remain high.
Members at the meeting expressed their concerns about financial stability, saying that loose monetary policy could pose a significant risk, and most members agreed that a faster rate hike than in the 2015 cycle may be sufficient.
Participants continued to judge that the Committee's net asset purchases should be concluded soon. Most participants preferred to continue to reduce the Committee's net asset purchases according to the schedule announced in December, bringing them to an end in early March. A couple of participants stated that they favored ending the Committee's net asset purchases sooner. In addition, meeting participants noted that the principles would serve as an important guide in future deliberations on balance sheet reduction. While no decisions regarding specific details for reducing the size of the balance sheet were made at this meeting, participants agreed to continue their discussions at upcoming meetings.
Finally, it was significant in the minutes that the participants emphasized they expected inflation to slow down within the year and that they saw the labor market at or near the maximum employment level, and that the appropriate policy course would be decided by looking at the economic and financial developments and their effects on the outlook and risk.
On January 26, the Committee had decided to keep the target range for the federal funds rate at 0 to 1/4 percent and to increase its holdings of Treasury securities by at least $20 billion per month and of agency mortgage‑backed securities by at least $10 billion per month as a result of the meeting.
In the minutes, Committee members noted that inflation has started to spread beyond the sectors affected by the coronavirus and to the wider economy, and they are of the opinion that inflation risks are high and a faster rate hike path may be required if these risks remain high.
Members at the meeting expressed their concerns about financial stability, saying that loose monetary policy could pose a significant risk, and most members agreed that a faster rate hike than in the 2015 cycle may be sufficient.
Participants continued to judge that the Committee's net asset purchases should be concluded soon. Most participants preferred to continue to reduce the Committee's net asset purchases according to the schedule announced in December, bringing them to an end in early March. A couple of participants stated that they favored ending the Committee's net asset purchases sooner. In addition, meeting participants noted that the principles would serve as an important guide in future deliberations on balance sheet reduction. While no decisions regarding specific details for reducing the size of the balance sheet were made at this meeting, participants agreed to continue their discussions at upcoming meetings.
Finally, it was significant in the minutes that the participants emphasized they expected inflation to slow down within the year and that they saw the labor market at or near the maximum employment level, and that the appropriate policy course would be decided by looking at the economic and financial developments and their effects on the outlook and risk.
