Fed could begin tapering bond purchases by mid-November, meeting minutes show

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Fed officials set to dial back $120 billion in monthly bond purchases

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majority of federal Reserve Officials agreed last month that they could begin to slow down their aggressive bond-buying program in mid-November, the first step that policymakers will take to dial back pandemic-era support. American economy.

Minutes of the September 21-22 meeting of the US central bank suggest policymakers are set to gradually begin dialing back $120 billion in monthly bond purchases, a policy known as “quantitative easing”. The credit is designed to be kept cheap, as soon as the next month .

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“Participants generally assessed that, provided that economic recovery remains broadly on track, a gradual tapering process that concludes around the middle of the following year would likely be appropriate,” Minute, released on Wednesday, said. “Participants noted that if a decision is made to initiate taping purchases at the next meeting, the process of taping could begin as early as mid-November or mid-December with a monthly purchase calendar.”

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Policymakers said they expect to end the taping process by July next year, about a month or two earlier than previously expected.

Fed officials last month left interest rates at rock bottom levels, where they have been sitting since March 2020, when COVID-19 forced an unprecedented shutdown of the country’s economy. But central bankers indicated they were preparing to start reducing $120 billion in monthly purchases, a policy known as “quantitative easing” designed to keep credit cheaper.

Reducing bond purchases would be the first step for the Fed to return to a more normal policy setting.

For months, the US central bank has been grappling with how to manage an exit from ultra-easy monetary policies without triggering a market sell-off in March 2020. With inflation rising at the fastest pace in more than a decade and well above the Fed’s preferred target of 2%, there are still about 7.7 million unemployed Americans.

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Some officials said last month that a pandemic-induced spike in consumer prices could last longer than expected and remain elevated in 2022. Economic projections from the September meeting suggest headline inflation for this year is expected at 3.7% — almost a full point higher than May forecasts, when Fed officials projected it would reach 3%.

The minutes said, “The majority of participants viewed inflation risks as upward-weighted because supply disruptions and labor shortages could last longer and on prices and wages than they currently assume.” may have a larger or more persistent effect.”

The Labor Department reported Wednesday that consumer prices rose 5.4% in September from a year earlier, the fastest pace in decades.


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