Federal Reserve policy makers disagreed on monetary expansion

Federal Reserve policy makers disagreed on monetary expansion to stimulate record this month, with most seeing a boost to growth and employment and a minority concerned about risks to inflation and the dollar.

Most officials at the meeting of November 2 to 3 additional purchases of securities was the maintenance of low asset prices and boosting interest rates, the Fed said in minutes of the meeting released today in Washington. The Fed also said it is considering ways to improve communication with public information meetings, as the initiation of the press by President Ben S. Bernanke.

The report highlights the tension within the Federal Reserve's decision to buy 600 billion U.S. dollars of Treasury bonds, which has since attracted criticism from Republican politicians in the country and some foreign governments. The increase of internal disagreement on purchases may hinder officials resolve to complete the total amount of the purchases scheduled until June.

Most expect that purchases "to help promote something stronger recovery in output and employment at the same time help inflation return over time to levels consistent with" legislative mandate of the Fed's open Fed said the Market Committee in its report.

"Some participants expressed the concern that further expansion of Federal Reserve's balance sheet could put downward pressure not allowed in the value of the dollar in currency markets," said the report.

Long-term projection

During the meeting, Fed officials raised their projections of unemployment for the next two years while reducing its growth prospects in 2011. Some policy makers raised their projections of unemployment in the long term, suggesting that some effects are more permanent U.S. recession on unemployment. The mid-range rose 5 percent to 6 percent from 5 percent to 5.3 percent.

U.S. stocks remained low after the report, with 500 of Standard & Poor's fell 1.6 percent to 1,179.25 at 2:26 pm in New York. Bond yields also remained low while the dollar was stronger against the euro.

The Federal Reserve found that the FOMC held a videoconference meeting Oct. 15 to discuss the merits of the largest blocks in front of small asset purchases and ways to improve communication.

For purchases, most officials "saw the benefits of a more gradual approach involving smaller changes in the Committee of the holdings of calibrated with input data," said Federal Reserve.

Numerical target

In addition, officials discussed the possibility of adopting a numerical inflation target and decided to maintain the policy of giving projections of policy makers' long-term inflation, the Fed said. The officials also discussed whether it would be "useful" by Bernanke " hold occasional meetings of the press to provide more detailed information to the public "that is included in the remarks after the meeting.

Vice President, Janet Yellen, chair a subcommittee to examine the FOMC "patterns of communication in order to ensure that the public is well informed on matters of monetary policy, while preserving the necessary confidentiality of the policy debates until his scheduled release, The minutes said. No deadline was given.

Bernanke led his colleagues in the purchases of assets after the purchase of $ 1.7 trillion in mortgage debt and Treasuries in March, which helped pull the U.S. the worst recession in seven decades without reducing the unemployment rate close to a maximum of 26 years.

Hoenig dissent

While Kansas City, Thomas Hoenig, president of the Fed was the only member of the FOMC voting to dissent, to several officials, including Fed Governor Kevin Warsh and Charles Plosser, president of the Philadelphia Fed, have expressed skepticism about strategy.

The Fed said in its statement of 03 November that the unemployment rate is very high and very low inflation compared with the long-term levels in line with the Fed's legislative mandate for price stability and maximum employment. Progress towards these goals ", has been disappointingly slow," said Federal Reserve.

The second round of so-called quantitative easing, QE2 dubbed by investors and economists, has been criticized by Republican politicians and officials from China, Germany and Brazil, who say the dollar has weakened and inflation risks turning . Bernanke said in a Nov. 19 speech that central banks are "unwavering commitment to price stability" and that the U.S. was at risk of leaving people out of work for long.

Unemployment rate

At the meeting, Fed officials expected fourth quarter of 2011 the unemployment rate from 8.9 percent to 9.1 percent, compared with 8.3 percent to 8.7 percent in its previous forecast June. For 2012, the unemployment rate is 7.7 percent to 8.2 percent, up from earlier projections of 7.1 percent to 7.5 percent. The rate was 9.6 percent in October, marking 18 months to 9.4 percent or higher.

The projections are the updates released for the first time since July schedule four times a year the Federal Reserve.

Authorities said the economy will expand 3 percent to 3.6 percent next year compared to 3.5 percent to 4.2 percent projection in June 2012 forecast by a 3 6 percent to 4.5 percent growth compared to earlier projections of 3.5 percent to 4.5 percent.

Earlier today, the government said the U.S. economy grew at a rate of 2.5 percent in the third quarter, revised from an estimated 2 percent last month. Economists surveyed by our News expect a growth of 2.5 percent in 2011 and 3.1 percent in 2012, based on average estimates.

Inflation Outlook

Policy makers left the outlook for inflation, excluding food and energy, with little change for the next two years, which indicates an increase in prices can stay behind the long-term projection of 1.6 percent to 2 percent for at least two years.

Fed officials gave its first outlook for 2013, projecting growth of 3.5 percent to 4.6 percent unemployment rate in the fourth quarter from 6.9 percent to 7.4 percent and core inflation 1.1 percent to 2 percent.

All forecasts reflect the central tendency, which excludes the three highest and lowest projections.

Moreover, the Fed staff economists raised their forecast for U.S. growth 2011 and 2012 on expectations investors to buy assets of the Fed for lower interest rates, stock prices increase and weaken the dollar, providing "additional support to the recovery," said the report.

Plosser, Warsh

On 16 November, three regional Fed presidents, Eric Rosengren, James Bullard and Dennis Lockhart said he hoped to buy the $ 600 billion of Treasuries. Plosser said Nov. 18 that it is too early to assume that the Fed will complete the purchase, while Warsh said on 08 November that the decision was not unconditional or indefinite and that the measure is "necessarily limited, restricted and subject to periodic review. "

John Boehner, nominated to be chairman of the House, and three other Republicans sent a letter to Bernanke, November 17, expressing "deep concern" about a policy that he said risked weakening the dollar and fueling asset bubbles .

Also last week, 23 people, including former Republican government officials and economists, Bernanke called for an end to stimuli, while two Republican lawmakers proposed stripping the Fed of its mandate to promote full employment.

Unlike the letter's signatories, many of the voices in defense of Bernanke have experience in central banking, as Fed Vice Chairman Alan Blinder, a former Bank of England policy makers David Blanchflower and the Bank of Israel Governor Stanley Fischer .

second round of the Fed unconventional monetary stimulus has increased expectations of inflation and stock prices, keeping yields below their long-term average.

500 Standard & Poor's has risen 11 percent since Aug. 27, the day of Bernanke stoked expectations of an extra boost to say the stock purchases can be justified if growth slowed. The yield on the benchmark 10-year Treasuries has climbed to 2.78 percent from 2.64 percent, holding below its five-year average of 3.9 percent.