The Minutes from the March (14th &15th) Federal Reserve’s monetary policy meeting have been published, highlighting that most Fed participants judged change to reinvestment policy would 'likely be appropriate' later this year, allowing balance sheet to shrink.
Key headlines (via Reuters):
- Judgment on balance sheet based on assumption economy performs as expected, allowing continued rise in federal funds rate
- Fed participants 'generally preferred' to change reinvestment of both treasury and mortgage-backed securities when the time comes
- Fed officials debated several scenarios, including whether to phase out reinvestments or halt them all at once
- 'Nearly all' participants said policy shift should be communicated 'well in advance' of an actual change, and with guidance about long-run size and composition of Fed holdings
- Fed meeting participants in general felt economic outlook had changed little since January with further strengthening of labor market and progress toward inflation target
- Fed officials noted uncertainty over how new administration fiscal policies may affect the economy, with some not expecting any impact until next year
- Fed officials split over whether stronger inflation warranted faster hikes now, or a more gradual pace given persistence of low inflation in past
- 'Several members' pushed for explicit recognition that the inflation target was 'symmetric' to help anchor inflation expectations around the two percent goal
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