Bernanke and FOMC Split On Future
Announcing no new monetary policies today, the Federal Open Market Committee instead focused on giving a progress report, offering a moderately brighter economic outlook, but flagging risks to growth that might require further easing down the line.
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Though the Fed never expressly stated that it would be considering fresh steps to boost the economy in its most recent committee meeting, one official pushed for action. However, ultimately nine of the ten Fed governors voted to keep a steady course. Charles Evans, president of the Chicago Federal Reserve Bank, was the sole dissenter, wanting the central bank to ease policy at this meeting.
“Economic growth strengthened somewhat in the third quarter,” the central bank said a statement released after the FOMC meeting. “Nonetheless, recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated.”
The Fed made no mention of the possibility for further bond purchases, nor did it discuss a possible overhaul of its communications policies. Officials had been debating both courses of action ahead of the meeting. Instead the central bank just kept its options open, reiterating that it was prepared to adjust its balance sheet as need be, but would not do so at this time.
More details will be available when the Fed releases its quarterly economic forecasts today at 2 p.m. Bernanke will hold a news conference shortly thereafter.
Last month, the Fed followed up an already aggressive series of steps to boost the economy by embarking on a program to sell $400 billion in short-term Treasuries to invest the money in longer-dated bonds. It also reinvested proceeds from its real estate bond holdings back into MBS.
The Fed slashed benchmark interest rates to near zero in December 2008, and plans to keep them there through mid-2013. It also expanded its balance sheet to a record $2.8 trillion.
Recently, some Fed officials have hinted at the possibility of expanding the central bank’s presence in the mortgage market. The Fed has already bought some $1.25 trillion in MBS.