The Federal Open Market Committee released its July 28-29 meeting minutes, shedding more light on the committee’s choice to maintain the target range for the federal funds rate at 0-.25%.
In its first release of the meeting, the committee the announcement said, “When the committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2%.”
The staff proposed in the meeting that future changes in the FOMC’s target federal funds rate range as well as associated changes in related administered interest rates—including the interest rates on excess and required reserves, the overnight reverse repurchase agreement rate (ON RRP), and the primary credit rate—all be effective on the day after the committee’s policy decision.
The decision was made to enhance the clarity of Federal Reserve communications. “It would also help promote federal funds trading within the new target range, partly by enabling the Desk to conduct ON RRP operations at the new rate specified by the committee on the same day that the new target range becomes effective,” the minutes stated.
The debate around the timing for raising the federal funds rate continued to differ across the board.
The minutes stated that some participants emphasized that the economy had made significant progress over the past few years and viewed the economic conditions for beginning to increase the target range for the federal funds rate as having been met or were confident that they would be met shortly.
Meanwhile, a couple of others thought that an appreciable delay in beginning the process of normalization might result in an undesirable increase in inflation or have adverse consequences for financial stability.
Once again, participants ultimately expressed support for emphasizing that the course of policy would remain conditional on the committee’s assessment of economic developments and the outlook relative to its objectives.