Fed officials talked about reducing asset purchases

Federal Reserve officials have argued that the US central bank should pave the way for a reduction in some of its resources. great monetary support to the economy if the recovery accelerates further.

According to the minutes of the Federal Open Market Committee meeting in late April, officials generally said that the U.S. economy remained “far” from its two goals of full employment and price stability, and that it still required a very loose monetary policy. But several argued that this year could come relatively soon for the Fed to change its stance.

“Several participants suggested that if the economy continued to move rapidly towards the committee’s goals, it may be appropriate at some point in the next meetings to start discussing a plan to adjust the pace of asset purchases,” the minutes said. .

The Fed, chaired by Jay Powell, currently buys $ 120 billion in Treasury and agency securities each month, and has promised to continue at this rate until it sees “substantial progress” toward its goals. inflation and employment.

The act underscored the central bank’s commitment to managing any political transition carefully, suggesting a more cautious approach than that taken by former Fed Chairman Ben Bernanke in 2013, discussions on withdrawing support for the Fed. politics provoked such an abrupt call that it led to tighter financial conditions globally.

“Many participants stressed the importance of the committee clearly communicating its assessment of progress towards its long-term goals well in advance of the time when it could be judged substantial enough to justify a change in the pace of asset purchases. “, was said in the minutes. “The timing of these communications will depend on the evolution of the economy and the pace of progress towards the committee’s objectives.”

Wednesday saw the resumption of U.S. government bonds, which generated higher returns. The yield on the 10-year benchmark was 0.05 percentage points higher, at 1.69%.

Bonds with a shorter date also joined the sale, with a two-year note yield rising 0.02 percentage points to 0.35%. The five-year note jumped about 0.05 percentage points to 0.86 percent.

“They don’t post these things without knowing that this has an impact,” said Kathy Jones, Charles Schwab’s chief fixed income strategist. “It’s the first clue, but it will be a gradual process. All language is conditioned. They leave a lot of flexibility. “

The FOMC meeting in late April was held before a relatively weak report on jobs and data showing a jump in consumer prices raised concerns about labor mismatches and rising inflation, complicating predictions of the trajectory of the American pandemic recovery.

Most U.S. monetary policy makers maintained a relatively bloody approach to inflation. “Rising demand as the economy reopens” would cause consumer price inflation to be “slightly above” 2%, but “after the transient effects of these factors fade , participants generally expected the measured inflation to be reduced, “according to the minute.

“Looking ahead, participants expected inflation to be at levels consistent with achieving the committee’s goals over time.”