By Harriet Torry
The Federal Reserve on Thursday released the transcripts of its
policy meetings in 2011, a year when it held interest rates near
zero, let one bond-buying program expire and created a new one in
its continuing efforts to boost the modest U.S. economic
recovery.
A team of Wall Street Journal reporters is parsing the records
and will be filing new details of the internal debates to our live
blog as we find them. While we dig through, here is a refresher on
what was going on that year in the economy and inside the Fed.
In 2011, Ben Bernanke was the Fed chairman, and Janet Yellen was
the vice chairwoman. The U.S. economy was growing moderately but
was rocked by the federal debt ceiling crisis at home and a
sovereign debt crisis in the eurozone.
The Fed kept its benchmark federal-funds rate in a range between
zero and 0.25% through the year. Officials felt good enough about
the economy to let their $600 billion bond-buying program known as
QE2 expire in mid-2011. But by late summer, they were contemplating
new stimulus actions, and in the fall launched a debt swap called
"Operation Twist" aimed at lowering long-term interest rates.
The partisan divide in the U.S. Congress took the country to the
brink of default on its debt payments in early August, a move that
was followed by the first-ever downgrade of the U.S.'s credit
rating, by Standard & Poor's, to AA-plus from AAA.
Meantime, European leaders scrambled as Greece teetered on the
brink of default, and the contagion spread elsewhere in the
eurozone. The European Central Bank raised interest rates twice, in
April and July, on jitters that commodity prices and a potential
oil shock could stoke inflation, only to reverse course in November
as the currency area slipped into recession.
We already know the basics of what the Fed did in 2011 because
it announces its actions at each meeting of the rate-setting
Federal Open Market Committee a few hours after it ends, and
releases minutes summarizing the discussions three weeks later. But
the minutes don't identify by name the remarks of the individual
participants. The transcripts reveal the verbatim comments of the
Fed's top policy makers and staff members at the meetings. Here is
a timeline of their meetings and other Fed-related events in
2011:
Jan. 25-26: The FOMC meets in Washington, reaffirms its $600
billion bond-buying program -- known as QE2, or its second round of
quantitative easing -- will continue through the second
quarter.
Feb. 10: Kevin Warsh announces he will resign from the board of
governors.
March 1: John Williams is named president of the San Francisco
Fed, succeeding Janet Yellen, who resigned Oct. 4, 2010, when she
was sworn in as vice chairwoman of the board of governors
March 15: The FOMC meets in Washington, says the economic
recovery is on a firmer footing.
March 18: The Fed intervenes in the currency market as part of a
coordinated effort by Group of Seven nations to weaken the Japanese
yen following a devastating earthquake and tsunami.
March 24: Fed Chairman Ben Bernanke announces he will hold
regular press conferences four times a year for the first time in
the central bank's history.
April 7: The European Central Bank raises interest rates due to
concerns about rising inflation.
April 26-27: The FOMC meets in Washington, says the recovery is
proceeding at a moderate pace and the labor market is improving
gradually. After the meeting, Mr. Bernanke holds his first press
conference as Fed chairman.
June 21-22: The FOMC meets in Washington as QE2 expires. In a
statement, officials downgrade their assessment of the economy's
performance, but give no indication they intend to take new steps
to boost growth and jobs.
July 31: President Barack Obama and congressional leaders reach
a deal to resolve the federal debt crisis.
Aug. 1: The FOMC holds an unscheduled conference call to discuss
"contingencies in the event that the Treasury was unable to meet
its obligations because the statutory federal debt limit was not
raised or in the event of a downgrade of the U.S. sovereign credit
rating."
Aug. 5: Ratings firm Standard & Poor's downgrades the U.S.'s
AAA rating for the first time, saying the budget deal didn't do
enough to address the gloomy outlook for U.S. government
finances.
Aug. 9: The FOMC meets in Washington and describes economic
growth so far in 2011 as "considerably slower" than expected while
noting a deteriorating jobs market. Three officials dissent against
the decision to hold interest rates at ultralow levels "at least"
through mid-2013.
Aug. 26: Mr. Bernanke, speaking at the Kansas City Fed's annual
retreat in Jackson Hole, Wyo., leaves the door open to more action
to boost the sagging U.S. economy.
Sept. 20-21: The FOMC meets in Washington, announces that it
would shift $400 billion of its short-term holdings into
longer-dated debt, in a debt swap dubbed "Operation Twist," in an
effort to reduce long-term interest rates.
Oct. 27: Eurozone leaders agree private investors in Greek
government debt will take a 50% write-down on the value of their
holdings as part of a package of measures designed to stem the
eurozone debt crisis.
Nov. 1-2: The FOMC meets in Washington, says economic growth
strengthened somewhat in the third quarter but unemployment remains
elevated.
Nov. 3: The European Central Bank, under new President Mario
Draghi, surprises with a rate cut.
Nov. 22: The Fed released new rules asking large banks to submit
to stress tests and detail their capital plans.
Nov. 28: The FOMC holds an unscheduled conference call to
discuss changes to the Fed's existing swap arrangements with
foreign central banks "in light of strains in global financial
markets."
Nov. 30: The Fed, the ECB, the Bank of England, the Bank of
Japan, the Bank of Canada and the Swiss National Bank
simultaneously announce action to prevent Europe's debt crisis from
triggering a global liquidity crunch.
Dec. 8: The ECB lowered its key interest rate by a quarter
percentage point to 1%.
Dec. 13: The FOMC meets in Washington, says the economy has been
expanding moderately despite slowing global growth.
Dec. 27: Mr. Obama nominates to the Fed board of governors
Jerome Powell, a Republican and former private-equity executive,
and economist Jeremy Stein, a Democrat.
Write to Harriet Torry at harriet.torry@wsj.com
(END) Dow Jones Newswires
January 12, 2017 10:20 ET (15:20 GMT)
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