FOMC minutes: Fed officials wrestle with language changes

October 8, 2014

WASHINGTON (10/9/14)--Concerned the move would send shockwaves through the market, the Federal Open Market Committee (FOMC) opted to keep the words "considerable time" in its policy statement despite support to drop the language, minutes from the Sept. 16-17 meeting revealed ( Oct. 8).

Moody's analysts say they believe change in future post-meeting policy statements is coming, but that the words "considerable time," referring to the idea that the Fed won't raise short-term interest rates for quite a while after quantitative easing ends, will remain in the FOMC's statements until at least December.

"Removing this would be a significant signal that higher rates are coming," said Ryan Sweet, Moody's analyst (

As has been widely documented, the Fed must tread carefully when altering its forward guidance, as even hinting that higher-interest rates could be on the horizon could cause a spike in long-term rates, which likely would trip up an already-fragile housing market recovery, Sweet said.

Most members of the FOMC said they would prefer basing any future changes to forward guidance on incoming economic data rather than on a pre-set timeframe.

The minutes also illustrated a divide between those who believe rates should be raised sooner and those who believe the Fed should wait to push them up. The hawks believe that wages and inflation will rise considerably in the coming months, while doves say inflation will fail for some time to reach the FOMC's 2% target (MarketWatch Oct. 8).

The next meeting of the FOMC will take place Oct. 28-29. The Fed said at its last meeting that it plans to entirely phase out its asset-purchase program at that meeting, barring any drastic changes to the market before then.

Federal Open Market Committee meeting minutes