Some members opined that the Fed should wait until the economy hits certain targets before moving — a road the bank has previously been down when it set, then abandoned, goals for unemployment and inflation before raising rates. Others, meanwhile, wanted less certain economic “qualitative” judgments before unwinding the balance sheet.
The Fed amassed most of the bonds it owns during three rounds of “quantitative easing,” a monthly bond-buying program aimed at juicing the economy following the financial crisis. The securities are mostly Treasurys and mortgage-backed securities. It has been reinvesting the proceeds from those bonds and rolling them over rather than shrink the balance sheet.
There also appeared to be some dispute about how the Fed should reinvest the proceeds — whether it should stop the reinvestments all at once, or gradually phase them out.
The minutes said the Fed will continue “its deliberations on reinvestment policy during upcoming meetings and would release additional information as it becomes available.”
Several Fed officials have said in recent public speeches that balance sheet reduction probably would occur this year. The minutes helped confirm that sentiment.
The minutes also stated that the Fed will do its best to communicate its intentions clearly. The central bank has come under fire in the post-crisis world for sometimes sending mixed messages on its intentions.
