According to the FOMC meeting minutes release for the March 19-20 meeting, opinions are somewhat divided on the Federal Open Market Committee’s monetary policy to continue purchases bonds to help grow the US economy. Currently, the Fed spends $85 billion a month purchasing U.S. Treasury instruments and mortgage-backed securities (MBSs).
This current program continues a series of monetary policy decisions, dating back to the financial collapse in 2008, to use the Fed’s bond portfolio to help support the U.S. economy.
The schemes are designed to keep long-term interest rates low and make it easier for businesses to borrow and spend money. Since late 2008, the Fed portfolio has increased to $3.2 trillion.
FOMC Opinions Vary
Most of the Federal Open Market Committee members voted to continue buying bonds through the middle of 2014. The report reveals that some FOMC members believe the downside of the program “outweigh” the benefits.
These members want to ratchet down the Fed’s investment program and bring it to an end if the economy continues to expand and job creation shows sustained improvements.
A few others see the “risks” escalating and a need to stop the program “before long.”
Nonetheless, the majority of FOMC members want to keep the bond purchase program in place until the economy shows sustainability and the ability to create jobs at a faster pace.
Job Numbers Supports Program Continuation
Assuming that the policy is working, the latest Employment Situation report indicates that it may be premature to for policymakers to consider phasing out the bond purchase program. In March, companies had a net higher of 88,000 jobs. In comparison, companies created an average of 220,000 market new jobs each month from November through February.
This is the fewest number of new hires in the last nine months. Although the report shows that employed the unemployment rate declined to a four-year low at 7.6% in March, many economists attribute the decline in the numbers to more individuals giving up finding a job.
Data for the unemployment rate does not include Americans who have stopped looking for employment. The FOMC has set a benchmark of 6.5% for the unemployment rate.
Minutes Released Prematurely
The Fed informed the Securities and Exchange Commission and Commodity Futures Trading Commission that the FOMC meeting minutes were mistakenly released to Congressional staff members a day earlier than usual. It requested the Office of the Inspector General to conduct an investigation. The incident appears to have been an accident. Thus far, there are no indications that the information was used illegally in trading.