Meeting Minutes Show the Fed Reserve Mulled Further Action & ‘Different’ Tools:
August 11-12, 2011 meeting minutes show the Fed was hard at work.
The Federal Reserve is considering various tools in its shed to help get the struggling economy back to normal growth. The Fed considered a wide range of actions such as buying more mortgage backed securities and further quantitative easing measures according to the August FOMC meeting minutes. Market participants have been left without a clear signal of what the Fed plans to do but the last FOMC meeting did include an unprecedented agreement by the members to extend low interest rates until 2013. Fed chairman Ben Bernanke’s speech at Jackson Hole in Wyoming also seemed accommodating and although people are unsure exactly what the Fed will do, most odds are that they will do -something nontraditional if necessary.
The Fed Reserve was also considering new actions such as keeping interest rate levels consistent with unemployment data and it is clear the Fed has been thinking ‘different’. Knowing that the Fed is willing to take up new measures to help stimulate the economy adds confidence to overall sentiment.
Excerpt from the FOMC August 2011 meeting minutes:
“These measures include executing reverse repurchase agreements on a large scale, potentially with counterparties other than the primary dealers; implementing a term deposit facility that would be available to depository institutions in order to reduce the supply of excess reserves; and taking steps to tighten the link between the interest rate paid on reserve balances held at the Federal Reserve Banks and the federal funds rate.” Read the full FOMC minutes here:
The Fed has signaled they will do something if necessary which probably is more important short term than- the actual measure implemented.