Fed Releases Transcripts of 2012 Policy Meetings

The Federal Reserve on Friday released the transcripts of its policy meetings in 2012, providing a window to officials' behind-the-scenes policy debates in a year when they unleashed a third round of bond purchases aimed at boosting the then-fitful U.S. economic recovery.

The transcripts, released with the customary five-year lag, provide the first verbatim public record of what individual Fed officials and top central-bank staffers said during their policy discussions at eight meetings of the interest-rate-setting Federal Open Market Committee in Washington. Until now, their comments have only been summarized in the minutes released three weeks after each meeting, without identifying any of the speakers by name.

A team of Wall Street Journal reporters will comb the records and file new details and analysis of the internal debates as we go. Meantime, here are a few reminders of what was happening at the Fed and in the economy.

In 2012, Ben Bernanke was the Fed chairman, and Janet Yellen was vice chairwoman. Jerome Powell, who is President Donald Trump's pick to become Fed chairman next month, joined the Fed's board of governors in May 2012. The transcripts released Friday show for the first time his comments at his first five meetings of the FOMC.

The Fed's decision to launch what became its largest, and most controversial, bond-buying program helped boost stocks by encouraging investors to shift into riskier investments. The Fed also kept its benchmark federal-funds rate in a range between zero and 0.25% through the year and made stronger commitments to keep rates low.

In the first half of the year, officials extended a program to purchase longer-term Treasury securities, known as Operation Twist, before ultimately launching the bond-buying program in stages later in the year. The open-ended purchases of $45 billion in Treasury securities and $40 billion in mortgage bonds a month would continue until the Fed began reducing those purchases in 2014.

While the economy struggled to achieve breakout growth, one important milestone came when home prices in many major U.S. cities hit bottom and began rising, setting the foundation of a sustained recovery for the first time since 2006. One tailwind for that upturn: Mortgage rates reached their lowest levels in more than 50 years.

Central banks abroad also took steps to boost growth, including most notably in July 2012, when European Central Bank President Mario Draghi stepped in to stymie doubts over the viability of the eurozone by saying policy makers would do "whatever it takes" to preserve the euro.

The Fed also initiated an investigation into an alleged leak of market-sensitive policy information in September 2012. The probe ultimately centered on information in a report sent to private clients by Medley Global Advisors, a policy information service. Over the next five years, the leak spurred investigations by congressional committees and law enforcement. In April 2017, Federal Reserve Bank of Richmond President Jeffrey Lacker unexpectedly resigned after revealing his involvement in the leak.

Here is a timeline of the policy meetings and other Fed-related developments in 2012:

Jan. 4: In an unusual foray, the Fed sends a 26-page paper to lawmakers expressing alarm over battered housing markets and outlines potential solutions policy makers could take.

Jan. 24-25: The FOMC meets and signals it expects to keep short-term rates near zero for almost three more years. The Fed adopts a formal inflation target for the first time, saying it wants inflation of 2% a year in the long run. In detailed tables, including the so-called "dot plot," the central bank documents for the first time the range of views officials hold about their economic projections and when rates might start rising.

Feb. 2: Testifying on Capitol Hill, Mr. Bernanke is challenged by Rep. Paul Ryan (R., Wis.) over fears the Fed is loosening its standards on keeping inflation low. Mr. Bernanke dismisses those concerns.

Feb. 14: The Bank of Japan surprises markets with two new measures to battle the country's long-running decline in prices, or deflation.

March 13: The FOMC meets and appears in no hurry to launch new measures to boost economic growth.

April 5: Brian Sack, who played a key role implementing many of the central bank's policies in the wake of the 2008 financial crisis, announces he will resign from his job at the Federal Reserve Bank of New York.

April 24-25: The FOMC meets and Mr. Bernanke leaves open the possibility of launching new programs to support economic growth if the recovery falters.

May 9: The Fed approves plans by three state-backed Chinese banks to expand in the U.S., including the first acquisition of a U.S. retail-banking network by a state-owned lender, a landmark step for American regulators.

May 25: Jerome Powell, a former private-equity executive, takes office as a member of the board of governors.

May 30: Jeremy Stein, an economist at Harvard University, takes office as a member of the board of governors.

June 19-20: The FOMC meets and announces plans to extend through the end of the year the Operation Twist program, which aims to drive down long-term interest rates by selling short-term securities and using the proceeds to buy longer-term securities.

July 5: Central banks in China, the eurozone, the U.K. and other countries announce new steps to bolster growth amid mounting worries about the global economy.

July 19: Central bankers in the U.S., U.K., and Europe band together to consider solutions to the Libor interest-rate-rigging scandal.

July 26: Speaking at a conference in London, Mr. Draghi issues his famous remarks that the ECB would do " whatever it takes to preserve the euro." Markets rally on the news amid mounting speculation Greece would be forced to leave the eurozone.

July 31-Aug. 1: The FOMC meets and signals it is getting closer to launching a new round of stimulus to shore up a weak economy.

Aug. 31: Mr. Bernanke uses his speech at the Kansas City Fed's annual monetary policy symposium in Jackson Hole, Wyo., to build the case for new efforts to stimulate growth.

Sept. 12-13: The FOMC meets and announces the beginning of an aggressive program to spur the economy through open-ended commitments to buy $40 billion in mortgage-backed securities every month. The third such round of quantitative easing, or QE, is designed to drive down long-term interest rates and push investors into other assets, like stocks. In March 2009, the Fed launched its first QE program, purchasing $1.25 trillion in mortgage bonds. It launched a second program in November 2010 to buy $600 billion in Treasury securities.

Oct. 4: Minutes of the September meeting show the Fed considering a revamp of its communications policies, including how to signal its plans to keep interest rates low for a longer period.

Oct. 23-24: The FOMC meets and signals its bond-buying policies will continue well beyond the end of the year.

Nov. 6: President Barack Obama wins re-election, which means the Fed isn't likely to see an ideological shift when top board positions come open.

Nov. 26: Mark Carney, the head of Canada's central bank, is tapped to be the governor of the Bank of England.

Dec. 11-12: The FOMC meets and announces it will continue purchases of long-term Treasury securities it began under Operation Twist. That means the open-ended bond-buying program will increase to $85 billion in securities a month in 2013, split between $40 billion in mortgage bonds and $45 billion in Treasurys. The Fed also says it won't touch short-term rates until the unemployment rate, then at 7.7%, falls to 6.5% or lower, provided that inflation remains under control.

Write to Nick Timiraos at nick.timiraos@wsj.com

(END) Dow Jones Newswires

January 05, 2018 10:19 ET (15:19 GMT)