WASHINGTON (MaceNews) – The Federal Open Market Committee, having repeated its willingness to be “patient” in its judgments about a strong economy, Wednesday issued a separate statement that was equally reassuring about the pace of normalization – yet refrained from any actual action.
There was no assessment of the balance of risks and no big hints about how many rate hikes might be required this year but also no reasons given to believe the Fed was backing away from what has been interpreted as a more dovish stance.
As the minutes of the last FOMC meeting showed, the committee was already willing to be patient before Chairman Jerome Powell was seen to shift to that language, showing any new sensitivity to market concerns were mostly in the eye of the beholder.
That there was a separate statement on balance sheet policy seemingly had more meaning than the wording of the statement itself, which said little beyond that the pace of normalization is under review.
After extensive deliberations and thorough review of experience to date, the Committee judges that it is appropriate at this time to provide additional information regarding its plans to implement monetary policy over the longer run. Additionally, the Committee is revising its earlier guidance regarding the conditions under which it could adjust the details of its balance sheet normalization program. Accordingly, all participants agreed to the following:
- The Committee intends to continue to implement monetary policy in a regime in which an ample supply of reserves ensures that control over the level of the federal funds rate and other short-term interest rates is exercised primarily through the setting of the Federal Reserve’s administered rates, and in which active management of the supply of reserves is not required.
- “The Committee continues to view changes in the target range for the federal funds rate as its primary means of adjusting the stance of monetary policy,” the statement said. “The Committee is prepared to adjust any of the details for completing balance sheet normalization in light of economic and financial developments.”
- The statement continued, “Moreover, the Committee would be prepared to use its full range of tools, including altering the size and composition of its balance sheet, if future economic conditions were to warrant a more accommodative monetary policy than can be achieved solely by reducing the federal funds rate.”
Powell’s press conference which begins shortly is expected to delve more deeply into why a separate balance sheet statement was deemed necessary.