NEWSLETTER
Thursday / September 29Sep 29
Thursday / October 14
Fed about to taper
According to the minutes of the US Federal Reserve’s September meeting released on Wednesday, monetary policy officials may begin to cut their extraordinary support to the economy as early as mid-November.
- The meeting summary shows that members feel the Fed is approaching its economic targets and may soon begin to normalize policy by reducing the pace of monthly asset purchases.
In a process known as tapering, the Fed will gradually reduce its $120 billion monthly bond purchases. The minutes show that the Fed will likely start cutting $10 billion a month in Treasury bonds and $5 billion a month in mortgage-backed securities (MBS).
The Fed has set a target date for the end of purchases to be mid-2022 if there are no disruptions.
The minutes noted “participants generally assessed that, provided that the economic recovery remained broadly on track, a gradual tapering process that concluded around the middle of next year would likely be appropriate.”
“Participants noted that if a decision to begin tapering purchases occurred at the next meeting, the process of tapering could commence with the monthly purchase calendars beginning in either mid-November or mid-December,” the minutes said.
Committee members cut their GDP forecasts for this year, but raised their inflation outlook. He said they expect unemployment to be lower than previous estimates.
In the “dot plot” of individual members’ expectations for interest rates, the committee said it could begin raising rates in 2022. Officials emphasized that the tapering decision should not mean pending interest rate hikes. However, some members at the meeting expressed concern that current inflation pressures could last longer than anticipated.
The Fed has set a target date for the end of purchases to be mid-2022 if there are no disruptions.
The minutes noted “participants generally assessed that, provided that the economic recovery remained broadly on track, a gradual tapering process that concluded around the middle of next year would likely be appropriate.”
“Participants noted that if a decision to begin tapering purchases occurred at the next meeting, the process of tapering could commence with the monthly purchase calendars beginning in either mid-November or mid-December,” the minutes said.
Committee members cut their GDP forecasts for this year, but raised their inflation outlook. He said they expect unemployment to be lower than previous estimates.
In the “dot plot” of individual members’ expectations for interest rates, the committee said it could begin raising rates in 2022. Officials emphasized that the tapering decision should not mean pending interest rate hikes. However, some members at the meeting expressed concern that current inflation pressures could last longer than anticipated.
