Officials at the Federal Reserve are leaning toward ending the stimulus program as soon as November.
According to a central bank memo issued Wednesday, unless the US economic situation changes drastically, Federal Reserve officials are leaning toward reducing monetary stimulus as soon as November.
The date when the Fed will stop buying bonds on a monthly basis has been a hot issue for months, and the policy-making Federal Open Market Committee (FOMC) hinted last month that it may happen “soon.”
The minutes of the FOMC meeting released on Wednesday showed policymakers speaking positively of plans to begin reducing bond purchases as soon as their next meeting in November, with the program ending in mid-2022.
According to the minutes, officials stated that “a gradual tapering procedure that completed around the middle of next year would likely be acceptable” if “the economic recovery remained generally on track.”
“The process of tapering may begin with the monthly purchase schedules commencing in either mid-November or mid-December,” if the FOMC makes the decision at its next meeting.
The central bank presently purchases $80 billion in Treasury bonds and $40 billion in mortgage-backed securities each month, a strategy put in place early last year as the Covid-19 outbreak wreaked havoc on the economy.
In recent months, however, the approach has been called into doubt due to rising inflation.
Participants favored a plan to lower Treasury bond purchases by $10 billion per month and mortgage-backed securities purchases by $5 billion per month, according to the minutes.
With inflation running high for much of this year, central bankers’ estimates from last month’s meeting indicated that interest rates could be raised from zero as early as next year.
Officials from the Federal Reserve indicated in the minutes that inflation could worsen.
“Most participants viewed inflation risks as being skewed to the upside,” according to the minutes, “because to fears that supply disruptions and labor shortages would remain longer and have larger or more persistent effects on prices and wages than they now estimate.”
Officials from the Federal Reserve also discussed the continued impact of Covid-19, stating that the predicted boost in labor force participation following the introduction of vaccines “had not yet occurred.”
Employers across the country have struggled to fill open positions, despite the economy still being five million jobs short of pre-pandemic levels.
“Various participants believed that a complete return to pre-pandemic conditions was unlikely,” according to the minutes, because many people had chosen to quit the employment through retirement and other methods.
However, several Fed officials projected that the labor force would return to its February 2020 level once the. The Washington Newsday Brief News is a daily newspaper published in Washington, D.C.