The confusion over exactly when the Federal Reserve will begin scaling back its huge economic stimulus efforts only deepened on Wednesday, with the release of a summary of the deliberations at the central bank’s last meeting in late July.
There were hints that some members of the divided committee are comfortable with beginning to ease the Fed’s programme of buying $85 billion a month in government bonds and mortgage securities as soon as their next meeting in mid-September. But there were also indications that another camp within the policy-setting group favours waiting until December, or even later.
For one thing, a number of participants at the Federal Open Market Committee raised concerns that economic growth in the second half of the year would prove disappointing, which would tend to encourage them to delay any changes in their current policy.
In June, the Fed’s chairman, Ben S Bernanke, indicated the stimulus programme could be scaled back this year if economic data continued to be relatively positive, but avoided setting any target dates.
The minutes of the meeting did little to clarify the issue. While “a few members emphasised the importance of being patient and evaluating additional information before deciding on any changes to the pace of asset purchases,” a few others “suggested that it might soon be time to slow somewhat the pace of purchases”, the summary of the July 30-31 meeting said. As a result, longtime Fed watchers came up with analyses so different from one another that it seemed as if they might be reading different documents.
With Bernanke to exit as Fed chairman next year, most analysts expect the Fed to initiate the tapering process before he leaves office, and to do so at one of the meetings remaining this year.
On Wall Street, investors were just as uncertain as economists and bond prices dropped after the release of the Fed’s minutes, sending interest rates higher.
New York Times