While it’s hard to deny that the housing recovery is gaining momentum, Federal Reserve Chairman Ben Bernanke is not convinced federal fiscal policies are a mere tailwind from the past. 

For now, the majority of Federal Open Market Committee members agreed to continue purchasing agency mortgage-backed securities to nurture the housing recovery while attempting to keep unemployment rates down.

Nonetheless, if the recovery continues, the Federal Reserve plans to taper off MBS purchases once the unemployment rate hits 7%, Bernanke suggested.

But there were two FOMC members who posted a dissenting vote on the continuation of the Fed’s bond-buying program, particularly James Bullard, president of the St. Louis Federal Reserve Bank

Bullard worries that the Fed’s decision to announce a plan to reduce its quantitative easing program was poorly timed.

Through the Summary of Economic Projections process, the committee was marking down its assessment of both real gross domestic product growth and inflation for 2013, and yet simultaneously announcing that less accommodative easing may be looming, the St. Louis Fed president noted. 

"President Bullard felt that a more prudent approach would be to wait for more tangible signs that the economy was strengthening and that inflation was on a path to return toward target before making such an announcement," the statement said.

The essence of Bullard’s decision is the committee’s lack of willingness to defend its inflation target of 2% and inflation expectations that have surprised on the downturn of 2013.

For instance, the personal consumption expenditures headline inflation rate is running below 1% and the PCE core inflation rate is nearly 1%, the statement noted.

To maintain any creditability, the committee should defend its inflation target when inflation is below target as well as when it is above its goal, Bullard stated.

"The markets may have overreacted a bit to the details of the Fed’s QE3 tapering timetable and the prospect of the first interest rate hike taking place in two years’ time," explained analysts for Capital Economics.

They added, "Nonetheless, the growing likelihood that rates will be raised a little earlier than we previously expected is one reason why we have revised up our Treasury yield forecasts."

Bullard also felt that the committee’s decision to authorize Bernanke to make an announcement of an approximate timeline for reducing the pace of asset purchases to zero was a setback from state-contingent monetary policy.

The St. Louis Fed president firmly believes policy actions should be undertaken to meet policy objectives, not calendar objectives. 

"President Bullard feels strongly that state-contingent monetary policy is best central bank practice, with clear support both from academic theory and from central bank experience over the last several decades," the statement noted.

Overall, members of the FOMC agree that going forward, an appropriate and effective monetary policy can be put into place with the right fundamentals in order.

The goal is to ease off the accommodative policy gas pedal without substantially impacting the housing comeback.