Some members of the Federal Reserve Board's policymaking committee raised concerns last month that moves to extend several liquidity tools might send the wrong message to markets, according to minutes of a conference call the central bank released Tuesday.
Committee members participated in the July 24 call to consider expanding auctions of Treasury securities by $50 billion and extending the maturity of loans delivered through cash sales. Fed staff members also asked the committee to extend the securities auction and investment bank access to the discount window beyond yearend.
"Some participants raised questions about the net benefit of approving and announcing the proposed changes at this time, asking, for example, whether such an announcement could suggest that the Federal Reserve saw financial markets as more fragile than expected, or whether adjustments to the liquidity facilities could cause market analysts to infer that the system intended to keep the facilities in place permanently," according to the minutes.
The Fed announced July 30 that it would extend the securities auction and discount window access to Jan. 30, and that it would offer cash loans with 28- and 84-day maturities.
Charles Plosser, the president of the Federal Reserve Bank of Philadelphia, was the lone dissenter, according to the minutes; he said there was no need to add the provisions regarding the securities auction "to the support already being provided to market liquidity."