Committee participants resumed their discussion from the November 2018 FOMC meeting of potential long-run frameworks for monetary policy implementation. At the December meeting, the staff provided a set of briefings that considered various issues related to the transition to a long-run operating regime with lower levels of excess reserves than at present and to a long-run composition of the balance sheet. The staff noted that during the transition to a long-run operating regime with excess reserves below current levels, the effective federal funds rate (EFFR) could begin to rise a little above the interest on excess ... (full story)

Federal Reserve officials acknowledged that the policy path ahead is “less clear” after approving an interest rate hike at their most recent meeting. Minutes released from the Federal Open Market Committee gathering in December showed the rate hike came with reluctance from a few members who thought the lack of inflationary pressures argued against the case for another increase. Officials at the meeting agreed that “some further gradual increases” in the benchmark funds rate would be appropriate. What that would translate to in practical terms, though, became less clear for a central bank that only a few months ... (full story)

The benchmark that the Federal Reserve uses to set interest rates could become more volatile as the central bank continues to unwind the portfolio of bonds on its balance sheet. Fed officials conducted further discussions about the impacts of balance sheet reduction at their December meeting, with members noting the work it will take to make the operation proceed smoothly. The Fed ran its balance sheet, comprised mostly of Treasurys and mortgage-backed securities, up to $4.5 trillion in operations during and after the financial crisis in an effort to lower interest rates and stimulate the economy. At present, the ... (full story)