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Fed decides how, not when, to exit easy conditions

Fed decides how, not when, to exit easy conditions (by Steve Goldstein)

WASHINGTON (MarketWatch) -- The Federal Reserve set out the order, in principle, the central bank will take to begin exiting from its ultra-easy monetary policy though it gave no indication of when it would do so, according to minutes of the June 21-22 Federal Open Market Committee meeting released Tuesday. That said, with members having both inflation and growth fears, "a few" said more policy stimulus might be needed if growth is too slow to reduce unemployment, while "a few" said inflation might prompt a quicker exit than the market expects. The suggested order of an exit is first to cease reinvesting principal on bonds it holds, and then either simultaneously or soon after change the forward guidance on the federal funds rate, followed by raising the target for federal funds rate, then selling agency securities after the first hike. The goal would be to sell the agency securities over three to five years. Also of note was the Fed's decision to adopt external communication guidelines, notably not to characterize other FOMC member views or what goes on at the meetings beyond what's released in the minutes.