Fed united on need to taper QE but split on timing

Markets left guessing on September wind down of stimulus programme

New York

Policy makers at the US Federal Reserve are "broadly comfortable" with plans to begin rolling back the bank's stimulus measures later this year, although divisions remain over appropriate timing, according to the minutes of the last meeting of the Federal Open Market Committee (FOMC).

Earlier this year, the Fed chairman Ben Bernanke signalled that the bank could begin cutting the size of its bond-buying programme, currently worth $85bn (£54bn) per month, before the end of 2013, and potentially wind down the extraordinary measures by the middle of next year.

The minutes of the last meeting of the FOMC showed that bank policy makers were in broad agreement with the plan, if "economic conditions improved broadly as expected".

"And if economic conditions continued to develop broadly as anticipated, the Committee would reduce the pace of purchases in measured steps and conclude the purchase program around the middle of 2014," the minutes said.

"At that point, if the economy evolved along the lines anticipated, the recovery would have gained further momentum, unemployment would be in the vicinity of 7 per cent, and inflation would be moving toward the Committee's 2 per cent objective."

However, some policy makers remained cautious about rolling back the support too soon. The announcement has triggered sharp swings in stocks, bonds and currencies as investors anticipate the Fed's next steps.

"A few members emphasised the importance of being patient and evaluating additional information on the economy before deciding on any changes to the pace of asset purchases," the minutes said.

Other policy makers were content to take action in the near future.

Investors and outside economists currently expect the latter group to prevail, pencilling in a reduction at the FOMC's September meeting.

The minutes showed that the Fed was looking at ways to roll back the stimulus, with policy makers being briefed on a possible "fixed-rate, full-allotment overnight reverse repurchase agreement facility as an additional tool for managing money market interest rates".

Responding to the minutes, Jacob Oubina, a senior US economist at RBC Capital Markets in New York, said "anybody that was expecting the minutes to be overtly dovish is probably going to be disappointed".

"They continue to highlight that the employment backdrop has improved significantly, and to us that means that they're inclined to start the tapering process over the course of the next few months," he said.

The minutes showed the Fed officials were continuing to anticipate that growth would "pick up somewhat in the second half of 2013 and strengthen further thereafter".

Listed factors included "accommodative monetary policy, improving credit availability, receding effects of fiscal restraint, continued strength in housing and auto sales, and improvements in household and business balance sheets," the minutes said.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Guru Careers: In-House / Internal Recruiter

£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Day In a Page

Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project