Watch for Debate on `Accommodative' Policy as Fed Minutes Drop

(Bloomberg) -- John Williams sees the Federal Reserve’s era of pledging easy monetary policy coming to an end. Minutes of the U.S. central bank’s May 1-2 policy meeting could reveal if his colleagues agree.

Michael Feroli, the chief U.S. economist at JPMorgan Chase & Co., would “not be surprised” to see some warning in the May minutes if a wording change is coming in June, he wrote in a note previewing the 2 p.m. Wednesday release.

Williams -- the president of the San Francisco Fed who takes the helm of the New York Fed on June 18 -- told Bloomberg in an interview last week that it might make sense to stop pledging “accommodative” policy and a prolonged period of low rates, echoing a debate that surfaced in minutes of policy maker’s meeting in March.

Here are the statement sentences that may be up for review:
  • “The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.”
  • “...the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.”

Any update would be partly a mark-to-market, reflecting that rates have moved from near zero toward more normal levels. But it’s not clear what level represents neutral -- a setting where policy neither fosters nor slows growth -- adding tension to the discussion of how and when to amend the language.

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