The Fed has already spent $1.25 trillion to buy up Treasury securities in a (somewhat futile) attempt to reduce interest rates, spur borrowing and weaken the dollar. Unfortunately, Treasury rates have been climbing lately. It hasn’t worked. But it sounds like the Fed plans to do more of it. Whatever it takes.
In their discussion of monetary policy for the intermeeting period, Committee members agreed that the Federal Reserve’s large-scale securities purchases were providing financial stimulus that would contribute to the gradual resumption of sustainable economic growth in a context of price stability. Members also agreed that it would be appropriate to continue making purchases in accordance with the amounts that had previously been announced–that is, up to $1.25 trillion of agency MBS and up to $200 billion of agency debt by the end of this year, and up to $300 billion of Treasury securities by autumn. Some members noted that a further increase in the total amount of purchases might well be warranted at some point to spur a more rapid pace of recovery; all members concurred with waiting to see how the economy and financial conditions respond to the policy actions already in train before deciding whether to adjust the size or timing of asset purchases. The Committee reaffirmed the need to monitor carefully the size and composition of the Federal Reserve’s balance sheet in light of economic and financial developments. The Committee also discussed its strategy for communicating the anticipated path of its asset purchases and the circumstances under which adjustments to that path would be appropriate. All members agreed that the statement should note that the timing and overall amounts of the Committee’s asset purchases would continue to be evaluated in light of the evolving economic outlook and conditions in financial markets.
Read the full FOMC minutes here.