FOMC Meeting Minutes March revealed that several of the participants considered that it would be appropriate to change the monetary policy stance towards a neutral stance in an expeditious manner, reported Reuters.
Additional comments summarized by Reuters:
“Participants also noted that, depending on economic and financial developments, a shift to a tougher policy stance might be warranted.”
“All participants felt that risk management would be important in deciding the appropriate monetary policy stance, and that policy should also be nimble in responding to incoming data and evolving outlooks.”
“On balance sheet reduction, participants generally agreed to monthly limits of about $60bn for Treasury securities, $35bn for mortgage-backed securities would probably be appropriate.”
“In general, members agreed that the caps could be implemented gradually over a period of three months or a little longer if market conditions warrant.”
“All of the options reviewed by policymakers featured a faster pace of balance sheet tiebreak than in the 2017-19 episode.”
“All members stressed the need to remain vigilant to the risks of further upward pressure on inflation and long-term inflation expectations.”
“Many members noted that they would have preferred a 50 basis point increase in the target range for the fed funds rate at this meeting.”
“In general, participants agreed that after the balance sheet liquidation has gotten under way, it would be appropriate to consider selling mortgage-backed securities.”
“Many participants noted that one or more 50 basis point increases in the target range might be appropriate at future meetings, particularly if inflation pressures remain elevated or intensify.”
“Most participants considered it appropriate to redeem Treasury coupon securities each month up to the maximum amount and redeem Treasury bills when coupon principal payments were below the limit.”
“Participants agreed that the Fed was ‘well positioned’ to begin balance sheet reduction as soon as after the end of the Fed meeting in May.”
“Participants generally noted that holding large holdings of Treasury bills is not necessary in an operating framework of ample reserves.”
“Members agreed that uncertainty regarding the path of inflation was high and risks to inflation were weighted to the upside.”
“Several members also pointed to downside risks to the outlook, including risks from a Russian invasion of Ukraine, a general tightening of global financial conditions and a prolonged rise in energy prices.”
“Several participants judged that the upside risk to inflation associated with the Ukraine war seemed more significant than the downside risk to growth.”
Source: Fx Street
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