Fomc Quotes

At its August 7, 2007, meeting, the FOMC had concluded that 'although the downside risks to growth have increased somewhat, the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected.' How's that going?, many of us thought when we read the statement. The predominant concern is inflation? Many Fed watchers blinked in disbelief. What were those guys thinking?

The FOMC supported my recommendation, with only Esther George dissenting, as she had all year.

In return, I tried to do Janet a favor by urging the assembled FOMC members to be more constructive and less strident in their public remarks.

When it comes time to change the federal funds rate, the Fed usually moves in 25 basis point[5] or 50 basis point increments, or decrements. A 25 basis point change is a pretty normal policy change, such as from 1.00% to 1.25%. If the Fed feels they need to move rates more aggressively, they’ll move by 50 basis points. For example, from 1.00% to 1.50%. At times when the Fed moved by more than 50 basis points, it meant there was a real crisis at hand. A 1.00% move – a full point – signals there are big problems out there. Changes in monetary policy are decided by the Federal Reserve Open Market Committee, or FOMC for short. The group meets eight times a year, approximately every six weeks. It’s composed of board members, who are political appointees, and the twelve regional Federal Reserve bank presidents, who vote on a rotating basis.

During this pivotal 1994 period, a couple of other procedures changed too. First, the time of the announcement moved to around 2:15 PM on the last day of the FOMC meeting - Fed policy changes were no longer telegraphed at Fed time. Then, in April, FOMC members took away Greenspan's power to move rates in between meetings altogether, a power Fed Chairmen had enjoyed for many years. Now, the market entered a period when rate moves were only expected at FOMC meetings. The new openness was actually good for the markets. If the market was pricing an ease or tightening, we knew the expected date. It made it easier to price short-term interest rates.

When the Fed makes a loan, taking securities or bank loans as collateral, the recipient of the loan deposits the funds in a commercial bank. The bank in turn adds the funds to its reserve account at the Fed. When banks hold substantial reserves, they have little need to borrow from other banks, and so the interest rate that banks charge each other for short-term loans—the federal funds rate—tends to fall. But the FOMC targets that same short-term interest rate when making monetary policy. Without offsetting action, our emergency lending—by increasing the reserves that banks held at the Fed—would tend to push down the federal funds rate and other short-term interest rates. Since April, we had set our target for the federal funds rate at 2 percent—the right level, we thought, to balance our goals of supporting employment and keeping inflation under control. We needed to continue our emergency lending and at the same time prevent the federal funds rate from falling below 2 percent. Thus far, we had successfully resolved the potential inconsistency by selling a dollar’s worth of Treasury securities from our portfolio for each dollar of our emergency lending. The sales of Treasuries drained reserves from the banking system, offsetting the increase in reserves created by our lending. This procedure, known as sterilization, allowed us to make loans as needed while keeping short-term interest rates where we wanted them.

Meanwhile, journalists and traders speculated feverishly on when “tapering” would begin. That was the term the press had affixed to a strategy that involved gradual reductions in our securities purchases rather than a sudden stop. Though I had used it, I didn’t particularly like it, and I tried to encourage others on the FOMC to use alternatives. “Tapering” implied that, once we had begun slowing purchases, we would reduce them along a predetermined glide path. Instead, I wanted to convey that the pace of purchases could vary, depending on the speed of progress toward our labor market objective and on whether the risks of the purchases were starting to outweigh the benefits. As usual, though, I had little influence on the terminology the press chose to use.

More recently, the Bank of Japan, eager to move away from zero interest rates, had tightened policy in 2000 and again in 2007. Each time, the move had proved premature and the bank was forced to reverse itself. Still, in the interest of good planning, I thought it made sense for the FOMC to discuss and agree on the mechanics of normalizing policy. And making clear that we had a workable strategy for tightening policy when the time came might ease the concerns of both the hawks inside the Fed and our external critics.

Systemic threats are notoriously hard to anticipate. If bubbles were easy to identify, for example, far fewer investors would get swept into them in the first place. But I was convinced that changing our approach would give us a better chance for success. In particular, I urged Nellie and her staff not only to think through what they saw as the most likely outcomes but also to consider worst-case scenarios. I had come to believe that, during the housing boom, the FOMC had spent too much time debating whether rising house prices reflected a bubble and too little time thinking about the consequences, if a bubble did exist, of its bursting spectacularly. More attention to the worst-case scenario might have left us better prepared to respond to what actually happened.

In response to current events, people often reach for historical analogies, and this occasion was no exception. The trick is to choose the right analogy. In August 2007, the analogies that came to mind—both inside and outside the Fed—were October 1987, when the Dow Jones industrial average had plummeted nearly 23 percent in a single day, and August 1998, when the Dow had fallen 11.5 percent over three days after Russia defaulted on its foreign debts. With help from the Fed, markets had rebounded each time with little evident damage to the economy. Not everyone viewed these interventions as successful, though. In fact, some viewed the Fed’s actions in the fall of 1998—three quarter-point reductions in the federal funds rate—as an overreaction that helped fuel the growing dot-com bubble. Others derided what they perceived to be a tendency of the Fed to respond too strongly to price declines in stocks and other financial assets, which they dubbed the “Greenspan put.” (A put is an options contract that protects the buyer against loss if the price of a stock or other security declines.) Newspaper opinion columns in August 2007 were rife with speculation that Helicopter Ben would provide a similar put soon. In arguing against Fed intervention, many commentators asserted that investors had grown complacent and needed to be taught a lesson. The cure to the current mess, this line of thinking went, was a repricing of risk, meaning a painful reduction in asset prices—from stocks to bonds to mortgage-linked securities. “Credit panics are never pretty, but their virtue is that they restore some fear and humility to the marketplace,” the Wall Street Journal had editorialized, in arguing for no rate cut at the August 7 FOMC meeting.

I worked for one of those who pushed back against the majority. He was the lone member of the FOMC who voted against the professor’s theories at that fateful meeting. He fought the good but lonely fight, and I, in my capacity as trusted adviser, waged many a battle with him. But the sad truth is we lost the people’s war. In a world rendered unsafe by banks that were too big to fail, we came to understand the Fed was simply too big to fight. I wrote this book to tell from the inside the story of how the Fed went from being lender of last resort to savior—and then destroyer—of America’s economic system.

Setting monetary policy is the job of the Federal Open Market Committee (FOMC), composed of the seven members of the Board of Governors in Washington and the presidents of the twelve District Banks.

As a reminder, among other things, the FOMC sets the fed funds interest rate, the rate at which commercial banks lend reserve balances to each other on an uncollateralized basis in the overnight market.

Yes, Repo rates are observable, liquid, and can be published. However, they are a risk-free rate which doesn't capture the credit spread. Repo rates could never fully represent bank funding costs. During the time a Repo rate replacement was being discussed, it was discussed at an FOMC meeting and once the FOMC minutes were published, it was clear Repo was not in the running. The hunt for the LIBOR replacement continued through 2018, when the Fed’s Alternative Reference Rates Committee finally announced their new rate. The new rate was called the Secured Overnight Funding Rate, or SOFR for short.

The reality that small changes in the phrasing of the FOMC’s statement could have important effects on policy expectations sometimes led us to spend what seemed like an inordinate amount of time on the choice of a single word.

at the request of Jean-Claude Trichet, I called a videoconference of the FOMC to discuss renewing

In the absence of a decision by the FOMC, I could not make definitive promises. But just by discussing the possibilities at length I would send a signal that we were prepared to act.

that a program of this size and importance should be undertaken with FOMC approval,

I was less sure of how well Dan, a lawyer among economists, would fit into the FOMC,

She also brought a practical banker’s perspective, a valuable complement to the economists on the Board and the FOMC.

. At FOMC meeting breaks he would inhale doughnuts, but nevertheless remained slim.)

Although FOMC members, hawks and doves alike, agreed it was time to wind down our emergency lending programs, they differed on when to begin rolling back our accommodative monetary policy.

Still, in the interest of good planning, I thought it made sense for the FOMC to discuss and agree on the mechanics of normalizing policy. And

They believed that, given the significance of the decision, I should not have announced the program before the FOMC formally voted.

list of possible patterns for Support & resistance Levels to consider when trading: Prior day High, Low & Close Gap & Previous unclosed Gap AB =CD Trading Range High, Low & Middle boundary Channel lines & Trendline High & Low of large trend bar EMA Opening price of the day Swing Highs & Lows Whole number (such as $50, $120) Fibonacci retracement level: 50%, 61.8% and extensions Daily, Weekly, Monthly High & Low & Close Measured Move Past 3-days High & Low Strong Breakout Bar Any Long-Wick Bar, the rejected portion High Volume Bar’s High, Low & Close News Bar’s High, Low (News such as FOMC report, Inventory Report, Consumer Price Index (CPI) and Producer Price Index (PPI) and others.