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Fed releases transcripts of 2016 policy meetings

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Fed releases transcripts of 2016 policy meetings

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Transcripts released by the Federal Reserve on Friday revealed the extent of officials’ debate in 2016 over how quickly to raise interest rates after pushing them from near zero at the end of the previous year.

Much of the discussion focused on geopolitical developments – first as a slowdown in China and commodity prices threatened to chill US manufacturing and later after British voters voted in favor of the exit from the European Union.

The Fed ended up raising its benchmark interest rate only once in 2016, in December, a few weeks after Donald Trump won the presidential election.

Hundreds of pages of transcripts from eight policy meetings in 2016, made public by the central bank after a traditional five-year lag, provide the most comprehensive view of decision-making on the cusp of a transition to a policy of “normalization”.

While the political results of the meetings were announced soon after they ended and session minutes summarizing them were released three weeks later, verbatim transcripts of the discussions were not public until now.

The transcripts offered new insight into the thinking of several key players still in the political arena, including Fed Chairman Jerome Powell, who was then entering his fifth year as governor, and Fed Chair Janet Yellen. , who is now Secretary of the Treasury. .

They show officials grappling in December with how the election of Mr Trump, who campaigned on promises to revamp government spending, taxes and trade policy, would reshape the outlook for growth and inflation in coming years.

“If the new administration changes economic policy in several areas as drastically as promised during the election campaign, we will have to develop an approach to crafting monetary policy in an environment of much greater uncertainty,” said Stanley Fischer, then deputy. – Chairman of the Fed. .

They also reveal the sense of humor of civil servants during their long political deliberations. St. Louis Fed President James Bullard opened his discussion of the economy on December 13, 2016 with a joke. “According to some interpretations of the Book of Revelations, when three unusual events occur together, they may be a sign that the apocalypse is near. Let’s take stock,” he began. “The Chicago Cubs won the World Series, Donald Trump won the presidency, and Bob Dylan won a Nobel Prize.”

Transcripts from the meeting show officials reflected on how the election exposed broader frustrations among Americans who felt left behind in the economy.

Mr. Trump had criticized the Fed during the campaign when the Republican candidate in September of that year sharply attacked Ms. Yellen, arguing that the central bank was keeping rates low to help Democrats at the polls.

Mr. Fischer, Ms. Yellen’s second-in-command, warned that under Mr. Trump “there will likely also be challenges to the Federal Reserve’s current operating procedures and independence.”

“Whatever happens, it is essential that we behave – and are seen to behave – in order to achieve our dual mandate and with the calm that we have shown in the past,” said Fischer. . “The bottom line is very simple: we have to do our job.”

Write to Nick Timiraos at nick.timiraos@wsj.com

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Fed releases transcripts of 2016 policy meetings

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