Markets showed a mildly positive reaction to the minutes, with the S&P 500 stock index edging into positive territory. That was a contrast to October, when the Fed released the September meetings and stocks rose 1.75 percent for the day. That was followed the day after by a 2.1 percent decline.
Kocherlakota spoke for nervous doves on the committee when he offered the lone dissent to the Fed statement. He was in favor of continuing QE even though the program has expanded the central bank balance sheet past the $4.5 trillion mark and has sparked concern over market bubbles and potential inflation ahead.
“Mr. Kocherlakota dissented because he believed that, in light of continued sluggishness in the inflation outlook and the recent slide in market-based measures of longer-term inflation expectations, the Committee should commit to maintaining the current target range for the federal funds rate at least until projected inflation one to two years ahead has returned to 2 percent,” the minutes said.
Members debated adding language to the final statement noting recent developments in the financial markets. October was a highly volatile month, with stocks and bond yields tanking Oct. 15 before battling back. The FOMC ultimately decided against including specific language, though it appears there was considerable discussion.
“Many participants commented on the turbulence in financial markets that occurred in mid-October,” the minutes said. “Some participants pointed out that, despite the market volatility, financial conditions remained highly accommodative and that further pockets of turbulence were likely to arise as the start of policy normalization approached.”
The Fed had been buying just $15 billion of bonds a month when it decided to pull the plug on the money-printing program. QE was in its third phase, which featured as much as $85 billion in purchases each month before the FOMC voted to begin tapering the program in December 2013.
“We would have liked to have seen more specifics in terms of a timeline for the first Fed rate increase. But instead we saw, as expected, a more aggressive conversation regarding new and lingering headwinds to that first rate increase,” Lindsey Piegza, chief economist at Sterne Agee, told CNBC.
In other discussions, most members indicated they saw the economy growing at a “moderate” pace, while the jobs market had “somewhat” improved. They considered the pace of housing gains to be “slow,” however.