FOMC Minutes: ‘It Depends’

The FOMC has 19 participants with 12 of them designated as voting members. The even dozen includes the seven Fed governors and five of the 12 regional Fed presidents, who rotate as members once a year. The minutes of the latest June 18-19 FOMC meeting suggest that the members are more dovish than the broader group of participants:

(1) Members. “While recognizing the improvement in a number of indicators of economic activity and labor market conditions since the fall, many members indicated that further improvement in the outlook for the labor market would be required before it would be appropriate to slow the pace of asset purchases.” This assessment appeared in the usual “Committee Policy Action” section near the end of the minutes.

(2) Participants. “About half of these participants indicated that it likely would be appropriate to end asset purchases late this year. Many other participants anticipated that it likely would be appropriate to continue purchases into 2014.” This assessment appeared in the appendix “Summary of Economic Projections.”

These two quotes from the minutes suggest that six or more of the voting members (i.e., “many” of the 12) are not inclined to taper QE at all unless they see that the labor market continues to improve. Apparently, nine participants (i.e., “about half” of 19) are pushing to terminate QE by the end of the year. If so, then at least two of those nine must be voting members since 19 (participants) minus 12 (voting members) is only seven (non-voters).

The participants authorized the Fed chairman to explain during his press conference what they meant to say in their usual post-meeting statement:

At the conclusion of the discussion, most participants thought that the Chairman, during his post-meeting press conference, should describe a likely path for asset purchases in coming quarters that was conditional on economic outcomes broadly in line with the Committee’s expectations. In addition, he would make clear that decisions about asset purchases and other policy tools would continue to be dependent on the Committee’s ongoing assessment of the economic outlook. He would also draw the distinction between the asset purchase program and the forward guidance regarding the target for the federal funds rate, noting that the Committee anticipates that there will be considerable time between the end of asset purchases and the time when it becomes appropriate to increase the target for the federal funds rate.

At his press conference on June 19, Fed Chairman Bernanke strongly suggested that QE would be tapered within the next few months and probably terminated by mid-2014 as long as the labor market continued to improve. Yet many of the voters on the FOMC weren’t ready to taper, let alone terminate it, according to the minutes of the FOMC meeting that concluded that same day.