Fed Minutes Show Concern Over Tapering Off Securities Purchases
January 8, 2014 by UPI - United Press International, Inc.
WASHINGTON (UPI) — Meeting minutes from the U.S. Federal Reserve’s December policy meeting indicate some concern it might be too early to taper off on securities purchases.
At the meeting, policymakers voted 9-1 to reduce an $85 billion per month asset purchasing program to $75 billion per month. The meeting, however, included 17 Fed officials, only 10 of whom were voting members of the Open Market Committee.
Easy money policies are generally expected to increase inflation, as prices are opportunistic, rising when there is money around to support the increase. With inflation “running below the committee’s longer-run objective,” however, a move to taper off purchases “was seen as posing possible risks to economic performance,” the minutes said.
Tapering off too quickly was also discussed.
“Most participants judged the marginal costs of asset purchases as unlikely to be sufficient, relative to their marginal benefits, to justify ending the purchases now or relatively soon,” the meeting minutes said.
One downside of keeping the $85 billion program intact, some felt, was the possibility that “a highly accommodative stance of monetary policy could provide an incentive for excessive risk-taking in the financial sector.”
Participants, however, also judged that benefits of the asset purchasing were losing steam.
“The majority of participants judged that the marginal efficacy of purchases was likely declining as purchases continue,” the minutes said.
Policymakers reflected on the Fed’s duel mission of supporting the labor market and keeping inflation under control.
“Most members agreed that the cumulative improvement in the labor market conditions and the likelihood that the improvement would be sustained indicated that the committee could appropriately begin to slow the pace of its asset purchases at this meeting,” the minutes said.
Inflation, the minutes said, was expected to pick up as the economic recovery began to build traction in 2014.
Still, the Fed minutes, which are released three weeks after a policy meeting, said the Open Market Committee would “monitor inflation developments carefully for evidence that inflation was moving back toward its longer-run objective.”