WASHINGTON — There are widening divisions among Federal Reserve officials about the value of its efforts to reduce unemployment, but supporters of those efforts remain firmly in control, according to an official account of the Fed’s most recent meeting in January.
An increasingly vocal minority of Fed officials are concerned that buying about $85 billion of Treasury securities and mortgage-backed securities each month is doing more harm than good. They argue the purchases may need to end even before unemployment drops, because the Fed’s efforts are encouraging excessive risk-taking and may be difficult to reverse.
But the Fed’s policymaking committee reiterated its determination in January to hold course until there is “substantial improvement" in the outlook for job growth, and several officials cautioned at the January meeting that the greater risk to the economy was in stopping too soon, according to the account, which was published after a standard three-week delay.
“A few participants noted examples of past instances in which policymakers had prematurely removed accommodation, with adverse effects on economic growth, employment and price stability," it said. “They also stressed the importance of communicating the Committee’s commitment to maintaining a highly accommodative stance of policy as long as warranted by economic conditions."
Proponents of strong action to reduce unemployment raised for the first time the possibility that the Fed should maintain a portion of its asset holdings even as the economy recovers, because doing so could magnify the benefits. Its holdings now total almost $3 trillion.