No need to make immediate adjustments to the pace of asset purchases

Minutes of the FOMC meeting Nov. 4-5 showed on Wednesday that lawmakers deemed immediate adjustments to the pace and composition of purchases are not necessary

However, policy makers further noted that circumstances could change to justify such adjustments.

Market reaction

The US Dollar Index did not show an immediate reaction to the FOMC minutes and was last seen losing 0.27% on the day at 90.98.

Key findings summarized by Reuters

“Most of the legislators who commented on the new proposals for the publication of the summary of economic projections indicated that the publication of all SEP materials at the time of the post-meeting statement would provide greater context for the political decision.” .

“Lawmakers said the role of asset purchases had shifted more toward supporting employment and targeting inflation.”

“Participants generally expected the strength of household spending to continue, especially on durable goods and residential investment.”

“The legislators judged that the purchase of assets provided insurance against risks that could resurface in the financial markets.”

“Several participants expressed concern that, in the absence of additional fiscal support, low- and moderate-income households may need to cut their spending dramatically when their savings are exhausted.”

“A couple of these participants noted reports from their banking contacts that households appeared to be rapidly depleting the funds they received from fiscal aid programs.”

“Some lawmakers thought that asset purchases could hedge against upward pressure on long-term rates.”

“Several policy makers noted the potential for limits to the amount of additional adjustments that could be provided through increases in asset holdings, expressing concern about unintended consequences.”

“Lawmakers noted that the Fed could provide more accommodations, if appropriate, by increasing the pace of purchases or by shifting to longer maturities.”

“The Fed could also offer more accommodations, if appropriate, by making purchases over a longer horizon.”

“Some participants noted that financing conditions for small businesses were particularly worrying as the PPP had ended and the prospect of additional fiscal support remained uncertain.”

“Several authorities indicated that the Fed could maintain the current amount of accommodation by lengthening the maturity and reducing the pace of purchases a little.”

“Some participants noted that climate change poses significant challenges to financial stability and welcomed the analysis of climate change as a source of crisis and as an underlying vulnerability.”

“Some members were concerned that keeping pace with MBS purchases could contribute to valuation pressures in the housing markets.”

“Some participants noted that it was important to extend the 13-3 programs beyond the end of the year.”

“Most lawmakers thought the Fed should implement a results-based guidance for asset purchases at some point.”

“Some participants were reluctant to make short-term changes to the asset purchase guidance due to uncertainty about the economic outlook.”