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 The comments, from the heads of the Federal Reserve banks of St.
Louis, San Francisco and Atlanta, freshen the message in the minutes
of the Fed's most recent policymaking meeting, also released
Wednesday, which showed many thought only a big change in outlook
could disrupt further measured reductions in purchases.
Indeed, several Fed policymakers wanted to drive home the idea that
their asset-purchase program would be trimmed in predictable,
$10-billion, increments, according to minutes of the Fed's January
28-29 policy meeting.
The minutes also showed the officials were nearing a decision on how
to adjust a promise to keep interest rates low for a while,
including the possibility of incorporating financial stability
concerns in that promise.
At the meeting, which was former chairman Ben Bernanke's last, the
Fed decided to make another modest cut to its bond-buying program,
which now runs at $65 billion per month.
It made the move despite weaker-than-expected job gains in December
and turmoil at the time in emerging markets brought on in part by
the withdrawal of Fed stimulus.
Participants generally "anticipated that the economy would expand at
a moderate pace in coming quarters," the minutes said.
"Several participants argued that, in the absence of an appreciable
change in the economic outlook, there should be a clear presumption
in favor of continuing to reduce the pace of purchases by a total of
$10 billion at each (policy) meeting."
Even those who were more worried about persistently low inflation
and high unemployment did not push for a pause to the taper, the
minutes showed.
A recent run of soft economic data since the meeting, much of it
attributed to bad weather, appears to have done little to change
that view, at least among Fed officials speaking Wednesday.
"I think a lot of this (softness) will come back out as we get into
better weather patterns," St. Louis Fed President James Bullard told
journalists after a speech at the Exchequer Club in Washington.
John Williams, president of the San Francisco Fed, said in New York
that the economy has shifted to a "healthy, stronger path" and noted
there is a "high hurdle" to stop the U.S. central bank from its plan
to keep cutting its bond purchases.
Similarly, Dennis Lockhart, president of the Federal Reserve Bank of
Atlanta, said the central bank will likely end its bond-buying
program by the fourth quarter "as long as the outlook remains solid
and does not deviate dramatically from the path we believe it's on."
None of the three vote on the Fed's policy-setting panel this year,
but all three participate in regular policy discussions.
PATH TO WIND DOWN
As it stands, the Fed under its new Chair Janet Yellen aims to wind
down and halt the bond buying later this year. She will run her
first policy-setting meeting March 18-19.
The Fed has promised to keep interest rates near zero until well
after the U.S. unemployment rate, now at 6.6 percent, falls below
6.5 percent, especially if inflation remains below a 2 percent
target.
The minutes showed Fed officials expect to alter this guidance soon,
given how close the current jobless rate is to the 6.5-percent
rate-hike threshold, and the minutes suggested a lack of appetite
for simply moving the threshold lower.
Unemployment touched 6.6 percent in February.
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In what might come as a surprise to some, the officials raised the
possibility that financial market risks, such as asset-price
bubbles, should play a bigger role in the decision on when to
tighten policy.
"Several participants suggested that risks to financial stability
should appear more explicitly in the list of factors that would
guide decisions about the federal funds rate once the unemployment
rate threshold is crossed," the minutes said.
Bullard said that while no language to that effect had been directly
proposed, "we've come off a very difficult financial crisis and we
don't want that to occur again." Williams, meanwhile, stressed the
Fed should not "oversimplify" its policy plan down to one or two
economic indicators.
Several officials also argued that any refreshed forward guidance
should stress the Fed's "willingness to keep rates low if inflation
were to remain persistently below the Committee's 2 percent
longer-run objective," the minutes showed.
Inflation has recently been running at slightly above 1 percent.
As it stands, Wall Street economists expect the Fed to keep rates
near zero until around the third quarter of next year, a prediction
that aligns with that of the central bank itself. The challenge for
the Fed is adjusting its forward guidance without sparking turmoil
in bond markets.
Beyond halting the bond buying and raising rates, the Fed also plans
eventually to shrink its balance sheet down from $4 trillion
currently. Williams told reporters it was appropriate for the Fed to
update its 2011 "exit strategy" for doing so.
"When the world changes, we have changed our plan in an appropriate
way," he said, noting that the Fed has made clear that it does not
intend to sell any of the assets it has bought until perhaps "later
on.
According to the minutes of the January meeting, some participants
wanted to amend the Fed's statement on longer-run goals and monetary
policy strategy to explicitly indicate that inflation running
persistently below the 2-percent target is as undesirable as
inflation running persistently above it.
In the end, however, Fed officials made only minor changes to the
statement, with Fed Board Governor Daniel Tarullo abstaining on that
point because "he continued to think that the statement had not
advanced the cause of communicating or achieving greater consensus
in the policy views of the Committee."
Only 10 officials voted on Fed policy in January, but a broader
group of 17 took part in the meeting. It was the first meeting
without a dissent since June 2011, a sign of how tumultuous
Bernanke's tenure has been.
(Additional reporting by Krista Hughes,
Karen Jacobs, Jason Lange, Ryan Vlastelica and Rodrigo Campos;
editing by Chizu Nomiyama and Ken Wills)
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