The Federal Reserve does not yet have enough support to adopt a formal inflation target, even as the central bank moves toward providing more guidance on future interest rates, according to minutes of the last meeting released on Tuesday.
In its last meeting, the Federal Reserve held interest rates unchanged and decided to continue “Operation Twist” — a program of shifting $400 billion in its bond portfolio toward longer maturities and continue reinvesting maturing principal payments into mortgage-backed securities.
While Chicago Fed President Charles Evans argued for further bond purchases, he was the lone advocate in the 10-member Federal Open Market Committee, though the minutes show that a “few” FOMC members said the economic outlook “might warrant additional policy accommodation.”
Minutes from the November 2 meeting show the group still split on how to best guide markets, businesses, and consumers about future rate decisions. Though “many participants pointed to the merits of specifying an explicit longer-run inflation goal,” the central bank remained concerned that doing so might mislead the public into thinking the Fed is “placing greater weight on price stability than on maximum employment.”
“Some suggested that a numerical inflation goal would need to be set forth within a context that clearly underscored the Committee’s commitment to fostering both parts of its dual mandate,” say the minutes, leaving the door open for such measures in the future.
The Fed has already pledged to keep interest rates at low levels — between 0% and 0.25% — through mid-2013, and has been experimenting with a range of actions designed to stimulate economic growth.