Some Federal Reserve officials have argued that the US Federal Reserve should chart a path to downsizing some of its banks. huge financial support economy if the recovery accelerates further.
According to minutes from a meeting of the Federal Open Market Committee in late April, officials generally said the U.S. economy was still “far” from its twin goals of full employment and price stability, and still required a very loose monetary policy. But few argued that this year could be a relatively quick time for the Fed to change its stance.
“A number of participants suggested that, if the economy continues to progress rapidly towards the board’s goals, it might be appropriate at some point in the upcoming meetings to begin discussions on a plan to adjust the rate of asset purchases,” the minutes said.
The Fed, which chairs Jay Powell, is currently buying $ 120 billion in securities and securities secured by agencies, and has vowed to continue at that pace until it sees “significant further progress” toward its inflation and employment targets.
The minutes underscored the central bank’s commitment to handling any policy transition with caution – suggesting a more cautious approach than that taken by former Fed Chairman Ben Bernanke in 2013, whose discussions on withdrawing policy support sparked a so-called narrowing tantrum that led to a sharp tighter financial conditions globally.
“Many participants stressed the importance of a committee that clearly communicated its assessment of progress in achieving its longer-term goals long before it could be deemed significant enough to justify a change in the pace of property purchases,” the minutes said. “The schedule of such communications would depend on the evolution of the economy and the pace of progress toward the committee’s goals.”
The sale of U.S. government bonds resumed on Wednesday, bringing higher yields. The yield on the reference ten-year treasury note was 0.05 percentage points higher at 1.69 percent.
Bonds with a shorter date also joined the sale, and the yield on the two-year bill of exchange rose 0.02 percentage points to 0.35 percent. The five-year note jumped approximately 0.05 percentage points to 0.86 percent.
“They don’t publish these things without knowing it has an impact,” said Kathy Jones, chief fixed income strategist at Charles Schwab. “It is the first hint, but it will be a gradual process. All language is conditional. They leave themselves a lot of flexibility. “
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The FOMC meeting was held in late April before a relatively weak job report and data showing a jump in consumer prices raised concerns about labor mismatches. rising inflation, complicating predictions for the trajectory of U.S. recovery from the pandemic.
Most American monetary policy makers have maintained a relatively hygienic approach to inflation. “A sharp rise in demand as the economy continues to open up” would make consumer price inflation “slightly above” 2 percent, but “after the transient effects of these factors disappear, participants generally expected measured inflation to ease,” according to the minutes.
“Looking further, participants expected inflation to be at a level that is consistent with the board’s goals over time.”