WASHINGTON (MNI) – The following is an excerpt from the text of
the minutes of the Federal Open Market Committee’s September 21 meeting
published Wednesday, titled “Staff Presentation on Policy
Tools:”

Staff Presentation on Policy Tools

The staff gave a presentation on several tools that could be used,
within the Committee’s current policy framework, to provide additional
monetary policy accommodation to support the economic recovery. The
presentation first reviewed three options for managing the size and
composition of the SOMA portfolio: a reinvestment maturity extension
program, a SOMA portfolio maturity extension program, and a large-scale
asset purchase program. Under the first of these options, the Federal
Reserve would reinvest the principal payments it receives on its
holdings of agency securities exclusively in long-term Treasury
securities. Under the second option, the Committee would purchase
longterm Treasury securities and sell the same amount of shorter-term
Treasury securities; these transactions would significantly increase the
average maturity of the SOMA portfolio, but the size of the Federal
Reserve’s balance sheet and the level of reserve balances would be
largely unaffected in the near term. Under the third option, the
Committee would purchase longer-term Treasury securities, increasing the
size of its balance sheet and the supply of reserve balances. The staff
also summarized a set of options for clarifying, for the public, the
Committee’s longer-run objectives under its dual mandate as well as the
Committee’s forward guidance about the likely future stance of monetary
policy. The options focused on ways to elucidate the economic conditions
that could warrant raising the level of shortterm interest rates.
Finally, the staff presentation summarized the potential implications of
reducing the interest rate that the Federal Reserve pays on reserve
balances that depository institutions hold in accounts at the Federal
Reserve Banks (the IOR rate).

** Market News International Washington Bureau: 202-371-2121 **

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