The Federal Reserve released the minutes from its last Federal Open Market Committee meeting held on September 22. Comments leaned toward an improving economy with improving retail sales and stabilizing unemployment.
The report listed details of the Fed’s exit plans for the Term Auction Facility (TAF) program and Term Securities Lending facility (TSLF).
The Federal Reserve has been purchases assets to provide liquidity in the credit markets since the crisis. Since the Committee met in August, the Federal Reserve’s total assets have risen about $125 billion, on balance, to approximately $2.1 trillion.
The Committee observed that the rate of new purchases could have an effect on asset prices, especially of mortgage backed securities. Given that possibility, the Fed believes a gradual reduction in the pace at which it buys agency debt and agency MBS could help promote a smooth transition in markets.
The Committee believes that such a strategy would be similar to the approach adopted in August for the purchases of Treasury securities and generally viewed it as a useful step to mitigate the risk of a sharp change in yields once the purchase programs end.
As for the economic outlook, the Fed said firms continued to reduce payrolls, but job losses abated further in August, with the decline in private payroll employment the smallest since that of August 2008. Although employment losses continued to be widespread, the rate of decline diminished in most industries.
Retail sales, after declining in July, rose sharply in August, excluding those at motor vehicle dealers, building materials stores, and gasoline stations. This suggests an increase in real consumer expenditures on non-motor-vehicle goods for the month.
The Federal Reserve also maintained its stance on keeping its federal funds target rate of 0-.25 percent for an extended period as it remains important to promote liquidity since inflation does not pose a near term threat.
