Fed Minutes Talk RRP, June Meeting
The Federal Reserve released the Minutes from its March 15-16 FOMC meeting. On the RRP, they state, "The deputy manager also outlined factors that the Committee might consider in determining whether to offer term reverse repurchase agreements (RRPs) over the end of the first quarter. In the ensuing discussion of this question among Committee participants, it was noted that, in view of the very elevated capacity of the overnight (ON) RRP facility that would remain available for the time being, offering term RRPs in addition to ON RRPs would be unlikely to enhance control of the federal funds rate over quarter-end, and offering term RRPs at an interest rate spread over ON RRPs could marginally increase the Federal Reserve's interest costs. For these reasons, Committee participants generally preferred not to offer term RRPs over the end of the first quarter. Participants noted that it may be appropriate to offer term RRPs at some point in the future after the Committee reintroduces an aggregate cap on ON RRP operations, and the Committee's decisions regarding term RRPs over quarter-ends had no implications for the FOMC's plan to phase out the ON RRP facility when it was no longer needed to help control the federal funds rate." On the Fed Funds rate they state, "[M]ost participants judged it appropriate to maintain the target range for the federal funds rate at 1/4 to 1/2 percent at this meeting while noting that global economic and financial developments continued to pose risks.... A couple of participants, however, saw an increase in the target range to 1/2 to 3/4 percent as appropriate at this meeting, citing evidence that the economy was continuing to expand at a moderate rate despite developments abroad and earlier volatility in financial conditions.... In their judgment, increasing the target range for the federal funds rate too gradually in the near term risked having to raise it quickly later, which could cause economic and financial strains at that time." Furthermore, they say, "A number of participants judged that the headwinds restraining growth and holding down the neutral rate of interest were likely to subside only slowly. In light of this expectation and their assessment of the risks to the economic outlook, several expressed the view that a cautious approach to raising rates would be prudent or noted their concern that raising the target range as soon as April would signal a sense of urgency they did not think appropriate. In contrast, some other participants indicated that an increase in the target range at the Committee's next meeting might well be warranted if the incoming economic data remained consistent with their expectations for moderate growth in output."
