Today: June 21, 2024

To Contribute →

Login Register

Fed sees trimming stimulus ‘in coming months’

November 21, 2013 at 1:35 am | News Desk

Fed sees trimming stimulus 'in coming months' Washington: Federal Reserve policy makers expected at their October meeting that they would begin cutting the stimulus program “in coming months”, the minutes of that meeting showed Wednesday.

The Federal Open Market Committee left the $85 billion a month asset-purchase program unchanged at the October 29-30 meeting.

But policymakers felt at the time that the labor market would continue to improve enough to soon begin the long-awaited taper of the program.

“They generally expected that the data would prove consistent with the committee’s outlook for ongoing improvement in labor market conditions and would thus warrant trimming the pace of purchases in coming months,” the minutes said.

At the same time, the group reiterated that any such move was contingent on data continuing to show a strengthening economy, and they discussed the need to better communicate their expectations for interest rate changes.

They noted that markets had overly linked together two separate policy decisions — when the asset purchases would be cut, and when the Fed would begin raising its base interest rate.

US bond yields and market interest rates surged beginning in May after Fed Chairman Ben Bernanke signalled that they could begin cutting the asset purchase program by late this year if the economy continued to improve.

Yet at the time, and still now, the FOMC has stressed that it has no plans to raise its benchmark rate from 0-0.25 percent level, where it has stood for nearly five years, before 2015.

The FOMC discussed ways it could shape its communication to “help the public separate the committee’s purchase program from its policy for the federal funds rate and the overall stance of policy.”

On action that most of the meeting participants thought could be weighed to reinforce its message that the base interest rate would be kept low was to reduce the rate the Fed pays on commercial banks’ excess reserves.

“The benefits of such a step were generally seen as likely to be small except possibly as a signal of policy intentions,” the minutes said.

The News Tribe – UK-based bilingual news website covering politics, technology, sports, health and lifestyle from US, Pakistan, Middle East and around the world

Click here for more information
The News Tribe

News Desk

Economic Affairs Editor

Leave a Reply