FOMC eyes several policy tools going forward
May 22, 2014 – The Federal Open Market Committee is looking at a variety of policy tools it could employ in the months ahead in dealing with interest rates as the economy continues to strengthen.
Minutes from the FOMC’s April meeting show some on the panel expect it will be some time before the federal funds rate is raised. However, meeting participants acknowledged that tightening monetary policy at a time when the central bank holds such a large balance sheet introduces a number of complications, and additional tools for boosting short term rates are being considered.
These tools could include a couple different types of reverse repurchase agreements, Term Deposit Facility operations and interest paid on excess reserves, according to the minutes. Panel members also indicated that if the economy continues to develop as expected, the committee will likely continue to reduce the pace of the Fed’s asset purchases, in steps, over time.
During the April meeting, FOMC members noted that Fed staff expect inflation to remain well below the committee’s longer-run objective of 2 percent over the next few years. They said the still-elevated rates of longer-duration unemployment and of workers employed part-time due to economic reasons suggest there is more slack in the labor market than is captured by the unemployment rate alone.
The FOMC’s next policy setting session is scheduled for June 17-18.
FOMC April 2014 meeting minutes