The Federal Reserve appears on track to slow its bond purchases by
the end of this year if the economy continues to improve. However, it remains
divided over the exact timing of the move.
That's the message from the minutes of the Fed's July 30-31 meeting released Wednesday.
The Fed's massive bond purchasing program represents the U.S. government's chief tool to stoke an economy still struggling to create jobs four years after the recession ended.
Debate among Fed chairman Ben Bernanke and his colleagues over when to taper the stimulus has roiled financial markets from Jakarta to Mumbai to New York. The release of the July minutes was widely anticipated as a glimpse into the thinking of the officials at the Federal Reserve, the agency responsible for regulating the amount of money in circulation.
"They'll probably start to taper in September," said Josh Feinman, the New York-based global chief economist for Deutsche Asset & Wealth Management, which oversees $400 billion. "They know that that's widely anticipated, and they haven't done anything to deflect those expectations."
According to the minutes, a few policymakers said they wanted to assess more economic data before deciding when to scale back the central bank's $85 billion a month in Treasury and mortgage bond purchases.
Some Fed officials have said the bond purchases, while helping reduce unemployment, are stoking excessive risk-taking in assets such as junk bonds and leveraged loans. Others said it "might soon be time" to slow the purchases, which have helped keep long-term borrowing rates near record lows, and also driven oil prices higher.
"There's more debating than deciding," said Michael Hanson, senior economist at Bank of America Merrill Lynch. "We didn't get a strong indication that the committee broadly is prepared to taper in September."
Nor did the minutes give any indication of how fast the Fed would scale back its purchases once it begins or whether it would cut back equally on Treasury and mortgage bond buying.
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