Most FOMC participants see QE3 buying end in 2013

Fed’s Remittances

When the time comes to exit from the record accommodation, higher interest rates may mean that the Fed’s “remittances to the Treasury could be significantly affected,” participants said. They also said the FOMC must “continue to assess whether large purchases were having adverse effects on market functioning and financial stability,” according to the record of the gathering.

Policy makers last month also revamped their communications strategy by linking the central bank’s interest rate outlook to unemployment and inflation. The Fed said its target interest rate will stay low “at least as long” as unemployment remains above 6.5 percent and inflation is projected to be no more than 2.5 percent. The FOMC had said previously that rates would stay near zero at least through the middle of 2015.

“They wanted to really explain their policies better,” said Bluford Putnam, a former economist at the Federal Reserve Bank of New York and now chief economist at CME Group Inc., the Chicago-based owner of the world’s largest futures market, said before today’s release. “What they’re really saying is they’re still going to give this economy a boost after it gets going.” Fed officials last month saw signs of improving fundamentals in the economy.

Household Debt

“Many” officials noted that household balance sheets were improving as debt levels fell and home prices recovered while “net worth was approaching levels seen before the financial crisis,” the minutes said. Fed officials cited higher loan costs and standards for some households and the uncertainty surrounding U.S. fiscal policy as “headwinds.”

“A number of participants suggested that the business sector was well positioned to expand spending and hiring quickly upon a positive resolution of the fiscal cliff negotiations,” the minutes said. “In a few regions, contacts reported concerns about the expense associated with new regulations, including those related to health care, and in some cases indicated a shift to the hiring of part-time workers in order to avoid these costs.”

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