Fed meeting minutes show uneasiness among officials over new interest rate strategy

Federal Reserve Chairman Jerome Powell arrived last year to speak at a “Fed Listens” event

eric baradat / Agence France-Presse / Getty Images

Federal Reserve Chairman Jerome Powell and his colleagues at the central bank faced doubts and protests in an attempt to guide the future path to market interest rates, minutes of their September meeting released on Wednesday.

After their meeting, he issued a statement by the Federal Open Market Committee vowing to keep the interest rate near zero until inflation was higher than the central bank’s 2% target for some time. Fed officials also released estimates that they expect rates to remain at least until the end of 2023.

The ten voting members of the committee had two differences from the new forward guidance. It was not known until the publication on Wednesday that the uneasiness about the new policy was quite widespread among the remaining seven officials who did not vote.

According to the minutes, “many” tactics of these Fed officials, in part, because the guidance may limit the flexibility of the central bank. He also argued that by influencing the market’s view of short-term interest rates in the future, “such guidance can contribute to the creation of financial imbalances that can occur for the FOMC to achieve its objectives in the future and Will make it more difficult. “

A “couple” of Fed officials argued against the strategy for various reasons. They wanted the Fed’s commitment to be even stronger and less qualified to keep interest rates near zero. They wanted to tell the Fed that the policy rate would remain near zero until inflation rates above 2% for some time.

Confusion may arise among investors, with Fed officials insisting that the new strategy was not an “unconditional commitment” to a particular path of interest rates.

The information pointing to a strong economic recovery in the wake of the coronovirus epidemic would give rise to expectations for a short period of rates being kept at zero and vice versa, the Fed said.

Many market observers talk about the Fed “promising” to keep it at zero until 2024.

Stocks gained momentum on Wednesday with the Dow Jones Industrial Average DJIA.
+ 1.95%
Over 500 points in afternoon trading.


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