FOMC Minutes: Keep the Money-Printing Party Going

The Federal Reserve launched its highly anticipated fourth round of quantitative easing in December. The latest money-printing program came only three months after the central bank’s unlimited QE3 was announced. Despite a more positive tone regarding economic conditions, the new Federal Open Market Committee minutes show that the central bank will keep its lead-foot on the monetary gas pedal.

According to the just released FOMC minutes, the Federal Reserve will continue to purchase $85 billion a month in mortgage-backed securities and U.S. Treasuries, in addition to keeping interest rates at record lows. Only one member, Esther L. George from the Kansas City Fed, voted against the actions. However, several members want the central bank to prepare for a day when it does not have to keep the economy afloat with the current quantitative easing programs.

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The statement explains, “Several participants emphasized that the Committee should be prepared to vary the pace of asset purchases, either in response to changes in the economic outlook or as its evaluation of the efficacy and costs of such purchases evolved. For example, one participant argued that purchases should vary incrementally from meeting to meeting in response to incoming information about the economy. A number of participants stated that an ongoing evaluation of the efficacy, costs, and risks of asset purchases might well lead the Committee to taper or end its purchases before it judged that a substantial improvement in the outlook for the labor market had occurred.”

Playing devil’s advocate, several other members warned that reducing or ending asset purchases too soon could also have a significant impact. They also argued that asset purchases should continue until a “substantial improvement in the labor market outlook had occurred.”