Fed officials talk about discussions about curtailing asset purchases
Some Fed officials believe that the U.S. Central Bank should establish a path to cut some of its reserves. A lot of financial support If the economic recovery accelerates further, the impact on the economy will be even greater.
According to the minutes of the Federal Open Market Committee meeting in late April, officials generally stated that the U.S. economy is “far away” from achieving the dual goals of full employment and price stability, and that a very loose monetary policy is still needed. But some people believe that the time for the Fed to change its position may be around this year.
The minutes of the meeting said: “Many participants believe that if the economy continues to progress rapidly towards the goals of the committee, it may be appropriate to start discussing plans to adjust the pace of asset purchases at some point in the upcoming meeting.”
The Federal Reserve, under the chairmanship of Jay Powell, currently buys $120 billion in U.S. Treasury bonds and institutional mortgage-backed securities every month, and has vowed to continue this pace until it achieves inflation and employment goals. “Making greater progress” so far.
The minutes of the meeting emphasized the Fed’s commitment to handle any policy transitions with care – a more cautious approach than the former Fed Chairman Bernanke adopted in 2013. Bernanke’s discussion of withdrawing policy support triggered a so-called conical tantrum. Leading to a sharp tightening of austerity policies. Global financial situation.
The minutes of the meeting said: “Many participants emphasized that it is important for the committee to communicate its assessment of the progress of the long-term goal before it may be judged to be sufficient to ensure that the speed of asset purchases changes.” The timing of this will depend on economic development and progress towards achieving the committee’s goals.”
The Federal Open Market Committee (FOMC) met in late April, after the employment report was relatively weak, and data showed that rising consumer prices have triggered concerns about labor mismatch. Rising inflation rate, Complicating the prediction of the trajectory of the US recovery from the pandemic.
According to the minutes of the meeting, most US monetary policy makers remain relatively optimistic about inflation. “As the economy further opens up, the surge in demand” will make the consumer price inflation rate “slightly higher” 2%, but “after the temporary impact of these factors has weakened, participants generally expect the actual inflation rate to ease.”
The minutes of the meeting added: “Looking forward, participants expect that the inflation rate will be consistent with the achievement of the committee’s goals.”
The sell-off of US government bonds resumed on Wednesday, thereby raising yields. The yield on the benchmark 10-year U.S. Treasury bond rose by 0.05 percentage points to 1.69%.
Short-term bonds also participated in the sell-off, with the yield on the two-year Treasury bond climbing 0.02 percentage points to 0.35%. The price of the five-year Treasury bond rose by about 0.05% to 0.86%.