The Fed is moving into uncharted territory. Never before has it considered raising rates with its investment holdings of Treasury bonds and mortgage-backed securities at such high levels.
The Fed has conducted three rounds of bond purchases in the past five years, driving its balance sheet above $4 trillion, to try to keep long-term rates low to boost the economy. In December, it began scaling back its purchases. But officials have said that even when they stop buying bonds late this year, they don't plan to start selling their holdings.
The Fed's discussion on its exit strategy involved how it will manage its investment holdings during a period when it will be starting to raise short-term rates.
The Fed published an exit strategy in 2011. But officials have said that plan needs to be updated to take account of changing economic circumstances and the fact that the bond holdings have grown much larger. They're now four times their size before the financial crisis hit with force in the fall of 2008.
The minutes said no decisions on modifying the exit plan were made at the April meeting. Rather, Fed officials requested that the Fed staff further analyze the available options. The committee said it was time for the Fed to review its options for winding down its stimulus. It also said the Fed would need to communicate its plans clearly to the public.
"Participants generally agreed that starting to consider the options for normalization at this meeting was prudent as it would help the committee to make decisions about approaches to policy normalization and to communicate its plans to the public well before the first steps in normalizing policy become appropriate," the minutes said.