FOMC Minutes: Some participants also noted that it could be appropriate to begin to reduce the size of the Federal Reserve's balance sheet relatively soon after beginning to raise the federal funds rate

BALANCE SHEET

• Some participants also noted that it could be appropriate to begin to reduce the size of the Federal Reserve's balance sheet relatively soon after beginning to raise the federal funds rate.


• Some observed that, as a result, depending on the size of any caps put on the pace of runoff, the balance sheet could potentially shrink faster than last time.


• Some participants judged that a significant amount of balance sheet shrinkage could be appropriate over the normalization process.


• Many policymakers judged the appropriate pace of balance sheet runoff would likely be faster this time than last.


• Participants judged that the appropriate timing of balance sheet runoff would likely be closer to that of policy rate liftoff than in the Committee's previous experience.

FFR

• Participants generally noted that, given their individual outlooks for the economy, the labor market, and inflation, it may become warranted to increase the federal funds rate sooner or at a faster pace than participants had earlier anticipated.


• Some participants also remarked that there could be circumstances in which it would be appropriate for the Committee to raise the target range for the federal funds rate before maximum employment had been fully achieved.


• Participants judged that it would be appropriate for the Committee to keep the target range for the federal funds rate at 0 to 1/4 percent until labor market conditions had reached levels consistent with the Committee's assessments of maximum employment, a condition most participants judged could be met relatively soon if the recent pace of labor market improvements continued.


• Policymakers thought changes in Fed Funds Rate should be primary means for adjusting stance of policy.

LABOUR MARKET

• Several participants viewed labor market conditions as already largely consistent with maximum employment.


• Committee's assessments of maximum employment, a condition most participants judged could be met relatively soon if the recent pace of labor market improvements continued.

ECONOMY  

• Many participants noted that the pandemic, particularly new variants of the virus, continued to pose downside risks to economic activity and upside risks to inflation.


• In their comments on inflation expectations, some participants discussed the risk that recent elevated levels of inflation could increase the public's longer-term expectations for inflation to a level above that consistent with the Committee's longer-run inflation objective.


• A few participants, however, noted that long-term inflation expectations remained well anchored, citing stable readings of market-based inflation compensation measures or the generally low level of longer-term bond yields.

Via Federal Reserve

05 Jan 2022 - 19:00- Fixed Income- Source: Fed