Fed stimulus debate minutes released early


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The Independent Online

The minutes of the last meeting of the US Federal Reserve arrived five hours earlier than expected today, with the record showing a growing debate about whether the central bank should begin rolling back its stimulus measures as early as mid-year.

The minutes of the March meeting were meant to be released in the middle of the afternoon, but Wall Street traders were surprised to see the document flash up on their screens in the morning. Bank officials decided to bring forward the release after the minutes were accidentally emailed to congressional staffers and trade organisations on Tuesday afternoon, many hours before they were the meant to be transmitted on Wednesday.

In a worrying disclosure this afternoon, it emerged that copies of the minutes had also been sent out to officials at a number of big Wall Street banks. According to a list of email addresses obtained by the Wall Street Journal, the minutes were accidentally transmitted early to employees at JP Morgan Chase, Goldman Sachs, Nomura and Citigroup.

Discovery of the mistake prompted the central bank to bring forward the release owing to the sensitive, market-moving nature of the information.

According to the minutes, all but one of the policymakers on the bank's Open Market Committee, which sets interest rates and decides the scope of the bank's policy actions, "saw the economic outlook as little changed since the previous meeting" and judged that "a highly accommodative stance of monetary policy was warranted in order to foster a stronger economic recovery".

At heart of the debate is the $85bn (£55bn) that the Federal Reserve is currently spending every month to buy mortgage-related and government bonds. The minutes showed that "a few members" thought that recent improvement in economic conditions "would make a reduction in the pace of purchases appropriate around midyear". Several others, however, thought that policy should be tightened later in the year, with the purchases potentially concluding by the end of the year.

Not everyone was in agreement, with two members indicating that the bond buying, which has been seen as a critical factor in the recent improvement in the all-important US housing market, "might well continue at the current pace at least through the end of the year".

While the debate shows that the Fed, led by Governor Ben Bernanke, was at its last meeting moving in the direction of tighter policy, the central bank is likely to exercise caution at its meeting this month, given the recent jobless figures. The last non-farm payrolls report showed that a mere 88,000 jobs had been created in March – less than half of what economists had expected. The slim gains came exclusively from the private sector, and were seen as evidence of growing concern among employers about the impact of the tens of billions of dollars worth of spending cuts currently hitting the US economy. If the so-called "sequestration" package of cuts continues to weigh on the economic outlook, the bank is unlikely to roll back its stimulus measures.