Thread by @sam_a_bell

FOMC 10 years ago -- 6/23/2009

Brian Sack: "...expectations of monetary policy tightening this year remain limited, but the market now anticipates nearly 200 basis points of tightening over 2010."

#GreenShootsTheme

"...The rise in the two-year yield was driven in part by a shift in monetary policy expectations, as the 'green shoots' theme continued to gain traction."

Brian Sack goes on: "The move towards higher yields has been accompanied by considerable chatter in the market about inflation risks." But don't worry about it.

More Sack: "Thus, despite the unprecedented fiscal deficits and the unprecedented expansion of reserves, the yield curve is not doing anything unprecedented."

Interesting given Bernanke's congressional testimony a few weeks before wsj.com/articles/SB124…

Trish Mosser (like Sack, a member of the Fed staff): "in recent weeks when it became clear to market participants that the pace of MBS purchases would not be adjusted as yields edged higher, MBS (and mortgage) rates rose sharply"

More Mosser:

Bernanke: "At the last meeting I promised we would focus today a good bit on our exit strategy, that is, on how we’re going to unwind the policies that we
have put in place"

interesting Rosengren observation and then Dudley response

MR. ROSENGREN. Well, we could always reload. So there is an option.
VICE CHAIRMAN DUDLEY. Right, but the Desk does not want to make a
presumption that you’re necessarily going to reload, and it’s probably inappropriate for the Desk to make that presumption.

Lacker is worried about too much stimulus

(reading through the transcripts it is amazing how much airtime a single reserve bank president takes up in these meetings ... Lacker must talk 3x - 5x as much as the median FOMC participant)

Warsh weighs in: "I’m exceptionally uncomfortable with expanding asset purchases, particularly now." [the staff is recommending expanded purchases of treasuries]

Fisher: "you’re going to hear some similarity to what you just heard from Governor Warsh and President Plosser... I feel particularly strongly about the issue of the Treasuries. As Governor Warsh mentioned, I’m beyond particularly uncomfortable, I am especially uncomfortable."

"Even if we figure out a cute way to say it, there still is a suspicion that
we’re monetizing deficits"

Yellen: "I want to emphasize that we have to be very careful not to signal an early end to policy stimulus"

Yellen: "the public is obviously concerned that we’re monetizing the debt and that it’s going to lead to an outbreak of inflation. I have to say that I completely disagree with these views, but I can’t say they’re not prevalent. I encounter them day in and day out."

Kohn: unlike Warsh, I did vote for LSAPs to lower long-term rates ... but now that deficit is so big I'm worried about monetizing debt and don't want to do more asset purchases

Dudley: "The anxiety that I have about inadvertently implying to the market that we are exiting soon is particularly high now, because the market has already priced in a lot more tightening than most of us think is likely over the next year or two."

Rosengren: "There’s no reason to do something of that magnitude unless we’re going to influence interest rates... if we’re not happy with where we are on our dual mandate, this is the only tool we have."

not so veiled shot at Warsh