Half of Fed members want to scale back bond-buying by year's end
2013-07-11 11:32:28
The U.S. economy continued to improve at a moderate pace in the second quarter, the minutes of the June meeting of the Federal Reserve revealed Wednesday.
Officials at the central bank remain divided about when the economic recovery will be sufficient to taper their unprecedented support measures. Half of the Fed's voting members say that QE should be scaled back by year's end as long as the economy continues to heal.
The Fed has been buying $85 billion in government and mortgage bonds each month in an effort to keep real interest rates as low as possible.
"Given their respective economic outlooks, all participants but one judged that it would be appropriate to continue purchasing both agency MBS and longer-term Treasury securities," the minutes read.
"About half of these participants indicated that it likely would be appropriate to end asset purchases late this year. Many other participants anticipated that it likely would be appropriate to continue purchases into 2014."
Officials were not taking into account last week's better-than-expected U.S. jobs report for June.
The relatively upbeat news raised speculation that the Fed may scale back the quantitative easing program in September.
Inflation remains well in check, according to most Fed officials. Many see inflation rising below their 2 percent target rate for some time, suggesting that their asset purchase program has had little impact on consumer prices, as some had feared.
Members want the Fed to clarify their guidelines for exiting QE "relatively soon." A number of them say Fed Chairman Ben Bernanke should explain this at a press conference following their next rate-setting meeting.
Bernanke "should describe a likely path for asset purchases in coming quarters that was conditional on economic outcomes broadly in line with the Committee's expectations," the minutes read.
"In addition, he would make clear that decisions about asset purchases and other policy tools would continue to be dependent on the Committee's ongoing assessment of the economic outlook."
Equity markets may be getting ready for tightening, but some members hinted at concerns that tightening might derail the housing market recovery.
"A couple of participants expressed concerns that some financial institutions might not be well positioned to weather a rapid run-up in interest rates," the minutes revealed.
A speech by Fed Chairman Ben Bernanke will garner close attention at about 4:15 pm ET this afternoon.