Five years later, the Federal Reserve (Fed) released the minutes of the 2017 Federal Open Market Committee (FOMC) meeting on Friday (13th). Powell, who was then a member of the Federal Reserve Board, experienced a major policy change in 2017. He said there was a need to balance the risks of “overheating” with “persistently low inflation”.
Since December 2015, the Federal Reserve started a new cycle of interest rate hikes. Until October 2017, the Federal Reserve began to reduce its balance sheet (shrink the balance sheet) and accelerate the pace of interest rate hikes. The latest 2017 Federal Reserve The minutes of the meeting provide investors with a glimpse into the views and opinions of the Fed’s tightening decisions that year.
The minutes of the meeting showed that against the backdrop of sluggish inflation and a labor market close to full employment, Powell, then a member of the Federal Reserve Board, experienced major policy changes in 2017, including the Fed’s start to shrink its balance sheet and accelerate the pace of interest rate hikes.
Powell urged the Fed to adopt a “gradual” approach to raising interest rates so that the U.S. central bank can more fully assess the labor market and inflation, predicting that the Fed will continue to take a cautious approach to the economy under Powell’s leadership until the new crown. After the outbreak of the epidemic, the Fed turned to loose policy in an all-round way.
Powell said on December 13, 2017: “I think there is a need to balance the risks of an overheating economy with persistently low inflation, and I still think a ‘gradual’ approach to unwinding accommodation is an appropriate balance between these two risks.” The Fed’s last meeting that year was also 41 days after Powell was appointed by former President Trump to replace Yellen as Fed chair.
“The incremental steps allow us to better assess the degree of labor market tightness and underlying trends in inflation,” Powell said.
The minutes also showed Fed policymakers debating when to begin reducing their holdings of $4.5 trillion in U.S. Treasuries and mortgage-backed securities (MBS), most of which were bought in the aftermath of the financial crisis.
Although inflation in 2017 was difficult to break through the Fed’s 2% target, strong economic growth, strong job growth, and unemployment falling to a more than 16-year low prompted the Fed to raise interest rates three times that year.
Still, nearly five years of undershooting the central bank’s target prompted Minneapolis Fed President Neel Kashkari to oppose rate hikes three times, while Chicago Fed President Charles Evans Evans also voiced dissent in December.
In June 2017, Fed officials worried that markets and the economy could be roiled by the debt-ceiling crisis later that year and decided to begin shrinking its balance sheet, the minutes show.
At that time, the Fed’s total assets were approximately US$4.5 trillion. In September 2017, it announced the reduction of its balance sheet, from US$10 billion per month to US$50 billion per month.
Fed officials realized that the press conferences after the Federal Open Market Committee (FOMC) meeting at that time were held on a quarterly basis, which is different from the current press conference after each meeting, so for some officials, the July announcement started Shrinking the balance sheet is less attractive than the September meeting.
Lael Brainard, then Fed governor, said: “There is no advantage in delaying the rate hike until July. The press will explain the details to the public.” The Fed ultimately chose to announce the balance sheet reduction in September.
The Fed has been led by Jerome Powell since early 2018, and he faces a similar policy task in 2023, but the inflation problem is not low inflation, but high inflation, Powell and Fed officials have said, The pace of rate hikes will be slowed down this year to reduce the risk of policy mistakes.
A number of Fed officials seem to agree that the rate hike will be slowed down to 1 yard next time, but they emphasize that it is still too early to announce victory over inflation.