According to minutes from the central bank’s September meeting released Wednesday, the Federal Reserve Board may begin to reduce the extraordinary aid they have provided to the economy by mid-November.
The meeting summary showed that members felt that the Fed was approaching its economic goals and could soon begin to normalize its policies by slowing down monthly asset purchases.
In a process known as tapering, the Fed slowly cuts $ 120 billion in bond purchases a month. The minutes showed that the central bank would probably start by cutting $ 10 billion a month in government bonds and $ 5 billion a month in mortgage-backed securities. The Fed is currently buying at least $ 80 billion in Treasury securities and $ 40 billion in MBS.
The target date for closing the purchase without confusion is mid-2022.
“Participants generally evaluated that a gradual tapering process ending around mid-next year is likely to be appropriate, provided that the economic recovery is largely on track,” the minutes said. Stated.
“Participants noted that if the next meeting decides to start tapering purchases, the tapering process may start with a monthly purchase calendar starting in mid-November or mid-December.” The summary said.
The Federal Reserve Board will then meet on November 2-3. Starting the tapering process in November is faster than some Fed watchers have shown, and most people expect a lift-off in December.
The minutes said the members’ estimates were “in line with the gradual tapering of net purchases to be completed in July next year.”
At a policy-making session in September, the Commission unanimously decided to keep the central bank’s benchmark short-term borrowing rate from zero to 0.25%.
The Commission also released a summary of economic expectations, including forecasts of GDP growth, inflation and unemployment. Members have reduced their GDP estimates this year, but raised their inflation outlook and showed that they expect unemployment to be lower than previous estimates.
In a “dot plot” of expectations for individual members’ interest rates, the Commission has indicated that it may begin to raise interest rates in 2022. According to the CMEFedWatch tool, the market is currently pricing with the first rate hike in September next year. After the minutes were released, traders raised the chances of a rate hike in September from 62% to 65%.
However, authorities emphasized that the tapering decision should not be seen as implying a pending rate hike.
However, some members of the conference expressed concern that current inflationary pressures could last longer than expected. Traders have a 46% chance of raising rates twice in 2022.
The minutes said, “Most participants are concerned that supply turmoil and labor shortages can be long-lasting and have a greater or more lasting impact on prices and wages than currently envisioned. I thought inflation risk was positively weighted. “
The document said that “a small number of participants” could have some “downside risk” in inflation as long-standing factors that have held prices down reappear. The majority of Federal Reserve Board officials hold the theme that current price increases are temporary and may subside supply chain bottlenecks and other factors. ..
However, inflationary pressures continue, and Wednesday’s reading shows that consumer prices have risen 5.4% over the past year, the fastest pace in decades.
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The Federal Reserve Board says it may begin a “gradual tapering process” by mid-November.
Source link The Federal Reserve Board says it may begin a “gradual tapering process” by mid-November.