FOMC members see downside risks to employment as increased

Minutes from the last Federal Reserve meeting read, “In discussing risk-management considerations that could bear on the outlook for monetary policy, participants generally judged that upside risks to inflation remained elevated and that downside risks to employment were elevated and had increased. Participants noted that, in these circumstances, if policy were eased too much or too soon and inflation continued to be elevated, then longer-term inflation expectations could become unanchored and make restoring price stability even more challenging. By contrast, if policy rates were kept too high for too long, then unemployment could rise unnecessarily, and the economy could slow sharply. Against this backdrop, participants stressed the importance of taking a balanced approach in promoting the Committee’s employment and inflation goals, taking into account the extent of departures from those goals and the potentially different time horizons over which employment and inflation are projected to return to levels judged consistent with the Committee’s mandate. Several participants remarked on issues related to the Federal Reserve’s balance sheet and implementation of monetary policy. A few participants stated that balance sheet reduction had proceeded smoothly thus far and that various indicators pointed to reserves remaining abundant. Nevertheless, with reserves declining and expected to decline further, they noted that it was important to continue to monitor money market conditions closely and evaluate how close reserves were to their ample level.”