Excerpt on policy from April 29-30 FOMC minutes

The following is an excerpt covering the Federal Open Market Committee's discussion of monetary policy taken from the minutes of the FOMC's April 29-30 meeting, which were released on Wednesday.

"Members viewed the information received over the intermeeting period as indicating that economic growth had picked up recently, following a sharp slowdown during the winter due in part to unusually severe weather conditions. Although labor market indicators were mixed, on balance they showed further improvement. The unemployment rate, however, remained elevated. While household spending appeared to be rising more rapidly, business fixed investment had edged down and the recovery in the housing sector remained slow. Fiscal policy was restraining economic growth, but the extent of that restraint had diminished. The Committee expected that, with appropriate policy accommodation, economic activity would expand at a moderate pace and labor market conditions would continue to improve gradually, moving toward those the Committee judges to be consistent with its dual mandate. Moreover, members continued to see risks to the outlook for the economy and the labor market as nearly balanced. Inflation was running below the Committee's longer-run objective and was seen as posing possible risks to economic performance, but members anticipated that stable inflation expectations and strengthening economic activity would, over time, return inflation to the Committee's 2 percent target. However, in light of their concerns about the possible persistence of low inflation, members agreed that inflation developments should be monitored carefully for evidence that inflation was moving back toward the Committee's longer-run objective."

"In their discussion of monetary policy in the period ahead, members noted that there had been little change in the economic outlook since the March meeting and decided that it would be appropriate to make a further measured reduction in the pace of asset purchases at this meeting. Accordingly, the Committee agreed that, beginning in May, it would add to its holdings of agency mortgage-backed securities at a pace of $20 billion per month rather than $25 billion per month, and would add to its holdings of longer-term Treasury securities at a pace of $25 billion per month rather than $30 billion per month. Members again judged that, if the economy continued to develop as anticipated, the Committee would likely reduce the pace of asset purchases in further measured steps at future meetings. However, members underscored that the pace of asset purchases was not on a preset course and would remain contingent on the Committee's outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of purchases."

"The Committee agreed that no changes to its target range for the federal funds rate or its forward guidance were warranted at this meeting, aside from removing a short paragraph that was added when the forward guidance was updated at the March meeting and which noted that the change in the Committee's guidance did not signal a change in the Committee's policy intentions; members deemed this language no longer necessary."

"At the conclusion of the discussion, the Committee voted to authorize and direct the Federal Reserve Bank of New York, until it was instructed otherwise, to execute transactions in the SOMA in accordance with the following domestic policy directive:

'Consistent with its statutory mandate, the Federal Open Market Committee seeks monetary and financial conditions that will foster maximum employment and price stability. In particular, the Committee seeks conditions in reserve markets consistent with federal funds trading in a range from 0 to 1/4 percent. The Committee directs the Desk to undertake open market operations as necessary to maintain such conditions. Beginning in May, the Desk is directed to purchase longer-term Treasury securities at a pace of about $25 billion per month and to purchase agency mortgage-backed securities at a pace of about $20 billion per month. The Committee also directs the Desk to engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve's agency mortgage-backed securities transactions. The Committee directs the Desk to maintain its policy of rolling over maturing Treasury securities into new issues and its policy of reinvesting principal payments on all agency debt and agency mortgage-backed securities in agency mortgage-backed securities. The System Open Market Account Manager and the Secretary will keep the Committee informed of ongoing developments regarding the System's balance sheet that could affect the attainment over time of the Committee's objectives of maximum employment and price stability.'"